Oil Limits and the Economy: One Story, Not Two

The two big stories of our day are

(1) Our economic problems: The inability of economies to grow as rapidly as they would like, add as many jobs as they would like, and raise the standards of living of citizens as much as they would like. Associated with this slow economic growth is a continued need for ultra-low interest rates to keep economies of the developed world from slipping back into recession.

(2) Our oil related-problems: One part of the story relates to too little, so-called “peak oil,” and the need for substitutes for oil. Another part of the story relates to too much carbon released by burning fossil fuels, including oil, leading to climate change.

While the press treats these issues as separate stories, they are in fact very closely connected, related to the fact that we are reaching limits in many different directions simultaneously. The economy is the coordinating system that ties together all available resources, as well as the users of these resources. It does this almost magically, by figuring out what prices are needed to keep the system in balance—how much materials of which types are needed, given what consumers can afford to pay.

The catch is that the economic system is not infinitely flexible. It needs to grow, to have enough funds to (sort of) pay back debt with interest and to make good on all the promises that have been made, such as Social Security.

Energy use is very closely tied to economic growth. When energy consumption becomes slow-growing (or high-priced—which  is closely tied to slow-growing), it pulls back on economic growth. Job growth becomes more difficult, and governments find it difficult to get enough funding through tax revenue. This is the situation we have been experiencing for the last several years.

We might think that governments would be aware of these issues and would alert their populations to them.  But governments either don’t understand these issues, or only partially understand them and are frightened by the prospect of what is happening. The purpose of my writing is to try to explain what is happening in terms that people who are used to reading the Wall Street Journal or Financial Times can understand.

I am not an economist, so I can’t speak to the question of what economists are saying. I do know that what economists say tends to change from time to time and from researcher to researcher. For example, in 2004, the International Energy Agency prepared an analysis with the collaboration of the OECD Economics Department and with the assistance of the International Monetary Fund Research Department (Full Report, Summary only). That report said, “.  . . a sustained $10 per barrel increase in oil prices from $25 to $35 would result in the OECD as a whole losing 0.4% of GDP in the first and second year of higher prices. Inflation would rise by half a percentage point and unemployment would also increase.” This finding is consistent with the issues I am concerned about, but I expect that not all economists would agree with it. Oil prices are now around $100 per barrel, not $35 per barrel.

The Tie of Oil and Other Forms of Energy to the Economy

Oil and other forms of energy are used to power the economy. Historically, rises and falls in the use of oil and other types of energy have tended to parallel GDP growth (Figure 1).

Figure 1. Growth in world GDP, compared to growth in world of oil consumption and energy consumption, based on 3 year averages. Data from BP 2013 Statistical Review of World Energy and USDA compilation of World Real GDP.

Figure 1. Growth in world GDP, compared to growth in world of oil consumption and energy consumption, based on 3 year averages. Data from BP 2013 Statistical Review of World Energy and USDA compilation of World Real GDP.

There is disagreement as to which is cause and which is effect—does GDP growth lead to more oil and energy demand, or does the availability of cheap oil and other types of energy power the economy? In my view, the causality goes both ways. Oil and other types of energy are needed for economic growth. But if people cannot afford oil or other types of energy products, typically because they don’t have jobs, then energy use will drop. And if oil prices drop too low, we will be in real trouble because oil production will stop.

How Oil Limits Work

People tend to think of limits as working in the same manner as having a box with a dozen eggs. Once the last egg is gone, we are out of luck. Or a creek dries up from lack of rainfall. The water is no longer available, so we have lost our water source.

With the benefit of the economy, though, limits are more complicated than this. If we live in today’s economy, we can purchase another box of eggs if we run short of eggs, assuming markets provide eggs at a price we can afford. If the creek runs dry, we can figure out a different approach to getting water, such as buying bottled water or hiring a tanker to get water from a source at a distance and bringing it to where it is needed.

Oil limits are a kind of limit we often hear concerns about. Being able to drill oil wells at all and refine the oil into products of many kinds requires a complex economy, one that can educate engineers working in oil extraction and can build paved roads, pipelines, and refineries. The economy needs to be able to produce high tech equipment using raw materials from around the world. Thus, there must be an operating financial system that allows buyers at one end of the globe to purchase materials from the other end of the globe, and sellers to have the confidence that they will be paid for contracted products.

If a company wants to extract oil, it can almost always figure out places where this theoretically can be done. If a company can gather together all of the things it needs—trained workers; enough high tech extraction equipment of the right type; enough pollution-fighting equipment, to prevent oil spills and spills of radioactive water; and leases on land where drilling is to done, then, in theory, oil can be extracted.

In fact, the big issue is whether the extraction can be done in a sufficiently cost-effective manner that the whole economic system can be supported. Even if the cost of extraction “looks” fairly cheap, such as in Iraq, or in some of the older installations elsewhere in the Middle East, the vast majority of the revenue that is generated from oil extraction (often as much as 90%) goes to support the government of the country where the oil is extracted (Rogers, 2014). This revenue is needed for many purposes: desalination plants to provide water for the people; food subsidies, especially when oil prices are high because food prices will tend to be high as well; new ports and other infrastructure; and revenue to provide jobs and programs to pacify the people so that the government will not be overtaken by revolt.

A major issue at this point is the fact that most of the easy-to-extract oil is already under development, so companies that want to develop new projects need to move on to locations that are more difficult and expensive to extract (Bloomberg, 2007). According to oil industry consultant Steven Kopits, the cost of one major category of oil production expenses increased by an average of 10.9% per year between 1999 and 2013. In the period between 1985 and 1999, these same expenses increased by 0.9% per year (Kopits, 2014) (Tverberg, 2014).

When production costs are higher, someone loses out. It is as if the economy is becoming less and less efficient. It takes more people, more energy products, and more equipment to produce the same amount of oil. This leaves fewer people and less energy products to produce the goods and services that people really want, putting a squeeze on the economy. The economy tends to grow less quickly because part of the goods and services available are being channeled into less productive operations.

The situation of the economy becoming less and less efficient at producing oil is called diminishing returns. A similar problem exists with fresh water in many parts of the world. We can extract more fresh water, but it takes deeper wells. Or we have to ship in water from a distance, using a pipeline or trucks. Or we need to use desalination. Water is still available but at a higher per-gallon price.

Diminishing Returns is Like a Treadmill that Runs Faster and Faster

There are many ways we can reach diminishing returns. One easy-to-illustrate example relates to mining metals. We usually extract the cheapest-to-extract ores first. An important cost consideration is how much waste material is mixed in with the metal we really want–this determines the ore “grade.” As we are gradually forced to move from high-grade ores to lower-grade ores, the amount of waste material grows slowly at first, then dramatically increases (Figure 2).

Figure 2. Waste product to produce 100 units of metal

Figure 2. Waste product to produce 100 units of metal

We know that this kind of effect is happening right now. For example, the SRSrocco Report indicates that between 2005 and 2012, diesel consumption per ounce of refined gold has doubled from 12.7 gallons per ounce to 25.8 gallons per ounce, based on the indications of the top five companies. Such a pattern suggests that if we want to extract more gold, the price of gold will need to rise.

The economy is affected by all of the types of diminishing returns that are taking place (oil, fresh water, several kinds of metals, and others). Even attempting to substitute “renewables” for nuclear and fossil fuels electricity production acts as a type of diminishing returns, if such substitution raises the cost of electricity production, as it seems to in Germany and Spain.

If the total extent of diminishing returns is not very great, increased efficiency and substitution can act as workarounds. But if the combined effect becomes too great, diminishing returns acts as a drag on the economy.

Oil Increases are Already Higher than the Economy Can Comfortably Absorb

For oil, we can estimate the historical impact of increased efficiency and substitution by looking at the historical relationship between growth in GDP and growth in oil consumption. Based on the worldwide data underlying Figure 1, this has averaged 2.0% to 2.4% per year since 1970, depending on the period studied. Occasional years have exceeded 3%.

The problem in recent years is that increases in the cost of oil production have been much higher than 2% to 3%. As mentioned previously, a major portion of oil extraction costs seem to be increasing at 10.9% per year. To make this comparable to inflation adjusted GDP increases, the 10.9% increase needs to be adjusted (1) to take out the portion related to “overall inflation” and (2) to adjust for likely lower inflation on the portion of oil production costs not included in Kopits’ calculation. Even if this is done, total oil extraction costs are probably still increasing by about 5% or 6% per year—higher than we have historically been able to make up.

According to Kopits, we are already reaching a point where oil limits are constraining OECD GDP growth by 1% to 2% per year (Kopits, 2014) (Tverberg, 2014). Efficiency gains aren’t happening fast enough to allow GDP to grow at the desired rate.

A major concern is that the treadmill of rising costs will speed up further in the future. If it is hard to keep up now, it will be even harder in the future. Also, the economy “adds together” the adverse effects of diminishing returns from many different sources—-higher electricity cost of production, higher metal cost of production, and the higher cost of oil production. The economy has to increasingly struggle because wages don’t rise to handle all of these increased costs.

As one might guess, when economies hit diminishing returns on resources that are important to the economy, the results aren’t very good. According to Joseph Tainter (1990), many of these economies have collapsed.

Why Haven’t Governments Told Us About these Difficulties?

The story outlined above is not an easy story to understand. It is possible that governments don’t fully understand today’s problems. It is easy to focus on one part of the story such as, “Shale oil extraction is rising in response to higher oil prices,” and miss the important rest of the story—the economy cannot really withstand high oil (and water and electricity and metals) prices. The economy tends to contract in response to a need to use so many resources in increasingly unproductive ways. We associate this contraction with recession.

We have many researchers looking at these issues. Unfortunately, most of these researchers are focused on one small portion of the story. Without understanding the full picture, it is easy to draw invalid conclusions. For example, it is easy to get the idea that we have more time for substitution than we really have. Financial systems are fragile. The world financial system almost failed in 2008, after oil prices spiked. We are still in very worrisome territory, with many countries continuing a policy of Quantitative Easing and ultra low interest rates. We may have only a few months or a year or two left for substitution, not 40 or 50 years, as some seem to assume.

Of course, if governments do understand the worrisome nature of our current situation, they may not want to say anything. It could make the situation worse, if citizens start a “run on the banks.”

The other side of the issue is that if governments and citizens don’t understand the full story, they may inadvertently do things that will make the situation worse. They certainly won’t be looking long and hard at what collapse might look like in the current context and what can be done to mitigate its impacts.

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to inadequate supply.
This entry was posted in Book draft, Financial Implications, Introductory Post and tagged , , , . Bookmark the permalink.

489 Responses to Oil Limits and the Economy: One Story, Not Two

  1. Paul says:

    Another potentially massive story….

    Petrodollar Alert: Putin Prepares To Announce “Holy Grail” Gas Deal With China

    http://www.zerohedge.com/news/2014-03-21/petrodollar-alert-isolated-west-putin-prepares-announce-holy-grail-gas-deal-china

    Hmmm… I wonder what the big picture is here — is the Ukraine about Russia instigating a move to dump the USD trade in oil???? And China following along…

    Now that would get the attention of the US for sure – that would strike at the heart of empire. It has been said that is why Saddam had to go — and Gadaffi…

    A little different situation if Russia and China pull the plug….

    • Don Stewart says:

      Dear Paul
      It simply doesn’t make sense that the US Government is prepared to start a nuclear war to prevent the people of Crimea from seceding from a country which wants to prevent them from speaking their native language, and joining a country where they are welcome to speak their native language.

      I can’t believe our leaders are that stupid. So let’s look for another explanation. Russia is the largest exporter of oil and gas in the world. The US would very much like to control that oil and gas. The US government operates the most pervasive ‘surveillance’ system the world has ever seen. And the CIA has competent analysts, as we can see by simply studying Tom Whipple’s writings. So it is a reasonable assumption that the US government understands that all the stuff about ‘energy independence’ and ‘a hundred years of gas’ are just stories designed to lure the populace into a sort of daydream. The US government also knows how easy it is to get Amercans worked up about Russians. So the US spends lots of money stirring up a nationalist movement in Ukraine, knowing full well that a nationalist movement will attack the ethnic Russians in Ukraine, provoking a response from Russia. Then the US and Europe try to leverage their assets to get control of the oil and gas, one way or the other. The goal is simply to get the multinational oil companies ownership of the oil and gas assets in Russia, to stop the decline in their production.

      Don Stewart

      • Paul says:

        For certain Ukraine is not about removing a corrupt government – every government since independence has been as or more corrupt.

        Something much bigger is going on – I had thought it was about getting a compliant gangster to replace Putin and get at Russia’s oil – but not so sure if that is the primary goal now.

        The US might be willing to consider a nuclear war if they thought the reserve currency was under threat – and it would be if China and Russia decided to trade oil in USD.

        If that happens they have effectively said that they believe the US empire is done – we do not fear you – you are weak – we do not think you will start a nuclear war over this.

        Potentially a lot at stake here – a very dangerous game of brinksmanship?

        • B9K9 says:

          There was a lot of concern that the former USSR would pull the trigger during its death throes. Thankfully, cooler heads prevailed. As the reality of the end of dollar hegemony sinks in with the masses of Americans, I’m assuming that most will bring enough pressure to bear to help prevent any hasty decisions.

          Like the Russians before them, most are willing to live in abject poverty rather than watch their entire family be vaporized. The US is just going to have to deal with its own version of K-R – right now, the sheep aren’t even in denial. But you can bet anyone with both access to information and the intelligence to understand what it means is way ahead of the curve.

          It’s how one uses that knowledge that’s the variable – every thing else is pretty much baked in already.

      • Robin Clarke says:

        The arms trade (the military-industrial complex warned of by Pres Eisenhower) wins in all wars. They recently won in Libya. They tried to start another profitmaking venture in Syria but were cobblered by the rogue parliament in London. They have thereafter put much effort into creating profitable tension in Ukraine. Once you understand that causing profitable wars is a huge big business a lot of things fall into place.

        • That is an interesting way of putting things. Wars are also a “good” way of creating jobs and of diverting attention from problems at home. It is even at times possible to borrow money to finance wars, when it would not otherwise be possible to borrow money.

          • Interguru says:

            The “usefulness” of war.

            In the last 500 years Europe has has uncountable wars. In the same time Latin America has had very few, almost none. Certainly no continent spanning conflicts.

            Where do people live better now?

    • Thanks! The one thing that Europe and the US have going for them is location. Location, together with built infrastructure, make it harder for Russia to dump the US and Europe. But I admit we are definitely pulling in that direction.

    • For those of you interested, I’ve done a few short Podcasts on Russia and Crimea on the new Frostbite Falls Daily Rant feature on the Doomstead Diner.  Also, we recently did a Collapse Cafe discussing Developments in Ukraine.

      RE

  2. Harry says:

    Cracking stuff as always, Gail. I tend towards the view that the bulk of politicians are oblivious to the impending crunch rather than keeping quiet for fear of sparking panic. I’ve certainly been very surprised by the lack of big-picture awareness in friends who work at high levels in energy and finance.

    I was looking at a Goldman Sachs graph which examines the break-even oil cost for the western majors after capex and dividends since the turn of the century. It looks to me that if you follow the trend forward, assuming that it remains constant, the oil needs to be up around $200 per barrel by the end of this decade. Am I roughly correct in thinking this? We saw what $147 dollars p/b did to the global economy… I can’t help but feel that time is now horribly tight.

    • Paul says:

      Harry – I think the guys at the very, very top understand what is happening — but the minions at the banks probably don’t get it.

      I’ve spoken to a few bankers about this and they remain confident that technology will solve the problem – not interested to talk about it – move along.

      At the end of the day they are focused on their part of the business and dancing while the music plays – and they can’t envision it ever stopping playing. Not only does the end of cheap oil mean the music stops – it means someone picks up the stereo and smashes it into a million pieces ensuring that the music will never play again.

      Cognitive dissonance is a very powerful mechanism – there are plenty of criminals behind bars who actually believe they did not commit the crime they were convicted of – or who have someone justified their actions.

      • Robin Clarke says:

        “I think the guys at the very, very top understand what is happening”

        This is a very popular delusion. In my experience you can show “sane” intelligent people very clear facts, and yet they do not form any actual understanding of their significance. That is not due to cognitive dissonance but due to their pre-formed paradigm of thinking blocking a move to a more correct one. This occurs even when there is no motive to avoid the new paradigm.
        A further factor is the life-history of people “at the top”. Power-ambitious school-leavers look at society and they see the engineers, scientists, and energy techs are all taking orders from superiors who are politicians and economists. So money and politics control science they presume. They study their PPE degree at Poxbridge and do not become any the wiser there. They live under the delusion that everything (including energy supply and practicality of technologies) is determined by politics and money, and never the other way round.
        These people are even more doomed than the rest of us (may be!).

        • Paul says:

          The reason I think the people at the very top know is because they have embarked on what are clearly suicidal economic policies – you don’t do that unless you fear something that is very very grim.

          We are also starting see people wake up with more analysis like this coming out….

          Note the author – very very senior…. if he is going public with this then the bank is of course behind him.

          I’d rather not see this sort of thing because if too many people wake up that accelerates us towards collapse.

          Why peak oil signals the world’s end, or at least the one we know – Author Steen Jakobsen, Chief Economist & CIO, Saxo Bank

          This is old story and, as the world still goes around, one could dismiss all this analysis. However, what is new is that business conditions are becoming more challenging for the oil majors as figure 7 suggests.

          Indeed since 2009, the capital expenditures of ExxonMobil, Royal Dutch Shell and Chevron have increased by 39-89 percent while their production has stalled. This is the balance-sheet-based proof that the peak-oil is happening now. (note – exxon and chevron have cut capex because they can’t make money with oil at $100+ BP is selling assets to be able to pay dividends)

          Indeed, according to Kopits, total upstream industry spending since 2005 has been USD 4 trillion (about USD 2.5 trillion spent on legacy crude oil production), and legacy oil production has declined by 1 mmb/d since 2005. By comparison, between 1998 and 2005 the industry spent USD 1.5 trillion on upstream development and added 8.6 mmb/d to total crude production.

          This declining energy return in energy production, which is nothing but the by-product of declining/exhausting oil reserves and the very fact we are experiencing the peak-oil, drives the whole economy down.

          So how all this relates to the “secular stagnation” scenario and all the fall in total factor productivity. Well, this is where things get a little bit technical and where our tale comes (finally!) to an end:

          http://www.zawya.com/story/Why_peak_oil_signals_the_worlds_end_or_at_least_the_one_we_know-SX2403201447159/

        • Peter S says:

          I agree with you. I’m not a fan of talking about some mysterious forces at the top of society (although I’m sure there are people in charge, and people with power, that stay out of the media), it’s just a distraction or even a reason to avoid the truth that even the most highly educated, the most powerful, people can still be stupid. Willful ignorance and cognitive dissonance exists at all levels, from the poorest to the richest.

          In university I saw first-hand that intelligence is not a pre-requisite to enter higher education, or for entering high level work, and we see politicians and professionals making the most appalling decisions professionally and personally all the time. Maybe “the powers that be” do know more than the masses, but I really would not count on that. They are just as likely just as caught up in the whole mess, believing the spin, as everyone else. If anything, I think they are even more oblviious: it seems to me that power and upper class life could seperate you even more from reality. When you’re the king, you believe you are powerful and nothing can stop you.

          • Paul says:

            I agree with much of what you say – but the one thing that the powers that be have is access to information that we do not.

            They have think tanks that have access to info such as remaining reserves in places like Saudi Arabia — this highly sensitive info will never get to us – the CIA is forever gathering crucial data and analyzing it for the decision makers.

            They will have experts who are not blinded by the deluge of PR of the MSM who will be able to provide more clarity on these situations.

            Take the Crimea for example – we have absolutely no way of knowing what is motivating the US to confront Russia here. Even for someone who is aware of the matrix and knows that the official line that Putin is evil and the good people deserve better is total bunk – have no way or knowing what the real reasons are

            Is Russia planning to sell oil and gas in non-USD? All we know is that the US is directly confronting Russia so there must be something very serious in play.

            We may never find out the real reason – just as we have never found out the real reason why the US invented WMD and invaded Iraq

            But those at the very top know – they make the decisions and they along with their PR consultants spin the lies that most people accept as ‘the news’

            • concerned says:

              I’m not sure if you’ve seen this report: http://www-local.bakerinstitute.org/publications/study_15.pdf
              It’s a report called the STRATEGIC ENERGY POLICY: CHALLENGES FOR
              THE 21ST CENTURY and was commissioned by Dick Cheney and prepared by The Baker Institute (James A. Baker’s think tank). It came out in April 2001 and is basically a primer for Peak Oil and explains the threat to America’s prosperity if Hussein cut off Iraq’s oil production. “Iraq has become a key “swing” producer, posing a difficult situation for the U.S. Government.” It’s worth a read.
              Here’s an article on it: http://www.theguardian.com/environment/earth-insight/2014/mar/20/iraq-war-oil-resources-energy-peak-scarcity-economy

            • Paul says:

              Thanks – I had not seen that.

              Interestingly Russia is similarly placed – albeit it in a far more powerful position than Saddam — more oil and gas + plenty of nuclear weapons.

            • Peter S says:

              I agree and I’m sure that there are people with power who know much more than the average guy on the street. And they want to keep that knowledge inequality, because knowledge really is power. But the world’s problem is due to incompetence, greed and stupidity – not a conspiracy to destroy society. Because that really would be a conspiracy theory.

            • Paul says:

              Not sure how those in the know at the top will use the knowledge of the implications of the end of civilization as we know it into power — but I am sure they are trying to work that out.

          • Calista says:

            I don’t want to identify anyone here. I know someone who works at the government. His job is modeling economic stuff, I think. He has a phd in economics. I’ve had discussions with him about the Bakken production. His response is that it’s going great and we’ll be able to supply X amount of our US needs in 5 years with the way it is going. I brought up the percentage decline per well per year. His general response is that it’s a technology issue. Everything will be substituted with better technology. He really believes that as the prices go up technology will then swing in to substitute. He’s a smart guy but he’s also isolated from the poorer side of life. I am through some personal connections probably the poorest person he has conversations with and he doesn’t even know how poor we really are because we have certain markers that allow us to “pass” in his world. I know, one person does not equate to the whole top level of the system but he really does believe in economics and really does believe in substitution at whatever price will push that. He often attempts to “educate” me. It is an interesting dance. I nod my head and don’t push too hard as I need, for work and personal stuff to continue to pass in that world. If I pushed too hard it would damage some relationships that would be very bad.

            So my point is that if those who are writing the reports the next layer up depend upon have full and complete belief in the theory of substitution then the next layer of decision makers don’t actually see what is going wrong. They may “know” in their gut that things aren’t going well but their worldview doesn’t necessarily allow them to find other answers. So I have met or know people at mid-level or higher who both know about peak oil and are adapting and ones who believe otherwise. I think saying “they know” is a real hit and miss situation just like your friends and family. Some may get it, others may struggle to take off their rose colored glasses. I have both sympathy and respect for those who get it and attempt to educate others and do something about the situation, whatever small thing that may be.

            • You make good points. If the midlevel people get the story wrong–perhaps because of having too much faith in substitution–their supervisors will as well.

            • Peter S says:

              I’ve had conversations with similar people. Once you get in a position like that, subconsciously you that your survival depends on towing the line. Maybe deep down you know it’s all wrong. But every step and decision is to keep you in your work and position. If you go against the flow, or accepted knowledge, it’s bad for your reputation, bad for your shareholders, bad for your prospects, it’s bad for everything. That’s a huge pressure to keep going the wrong way, and it must influence what you believe.

              Even I accept that we’re headed for huge problems in a few years. But I step onto the metro, see people playing candy crush on their way to work, and I suddenly worry a bit less. It numbs your senses. I imagine the same for people up the power ladder too.

            • Interguru says:

              It is difficult to get a man to understand something, when his salary depends upon his not understanding it!” — Upton Sinclair

              http://en.wikiquote.org/wiki/Upton_Sinclair

        • sponia says:

          “Power-ambitious school-leavers look at society and they see the engineers, scientists, and energy techs are all taking orders from superiors who are politicians and economists. So money and politics control science they presume. They study their PPE degree at Poxbridge and do not become any the wiser there. They live under the delusion that everything (including energy supply and practicality of technologies) is determined by politics and money, and never the other way round.”

          This is why it is so important to have a broad and general education, as well as a specialized field of study. Of the two, the first will be the most valuable, in the days ahead.

          If the community leaders have even a bare glimpse of the true nature of physical reality around them, they won’t make so many costly and embarrassing blunders.
          Likewise, if engineers and scientists study and gain skill at exercising money, politics, and power, then they are not so easily ordered about by people who have devoted their lives to nothing else. (The ones who do, and can stand the work, usually wind up running the department anyway.)

          As we continue to adapt to changing world conditions, it will require a mastery of and proficiency in many fields; and in most cases, a ‘handbook’ level of skill will suffice. Being able to stitch up your own wounds without contracting infection, for instance. Fancy surgery might be beyond reach, for a while. Simple stuff, we will have to learn to handle ourselves.

          But I think we might need to practice; resiliency it is not something that is highly valued today, and so it is not taught in our systems of education. But it is perhaps the one thing you can bring to the struggle certain that will always be useful, needed, and in short supply.

    • BC says:

      “I was looking at a Goldman Sachs graph which examines the break-even oil cost for the western majors after capex and dividends since the turn of the century. It looks to me that if you follow the trend forward, assuming that it remains constant, the oil needs to be up around $200 per barrel by the end of this decade.”

      Yes, Harry, that’s about right.

      The average price of Cushing since 2005-08 has been $80-$88, the period during which US “oil” extraction has doubled but US real final sales per capita have grown very little, if at all. If the US economy can’t grow in real terms per capita at $80 oil, it certainly can’t grow at $150-$200.

      In fact, take away the shale and echo unreal estate bubbles, and the US private sector is worse off. The outsized gains to the energy sector are a net zero-sum drag on the rest of the economy.

      It appears that the US economy reached the cyclical investment and labor utilization constraint in Q3-Q4 2013, implying that employment will likely decelerate and cease growing, and the U rate will rise again later in 2014 and into 2015.

    • It may very well be that oil prices need to be around $200 barrel at the end of the century, if, as Kopits says, many companies already need close to $150 barrel on a cash flow basis–a little less if they can continue to borrow more money to finance their operations.

    • Lindon says:

      “I tend towards the view that the bulk of politicians are oblivious to the impending crunch rather than keeping quiet for fear of sparking panic.”

      I doubt that, honestly, at least not the top level politicians. The U.S. Military is keenly aware of peak oil, water and climate change security implications. I doubt that the military honchos would simply not inform top level politicians about the approaching dangers, even though their funding and military operations are directed by those politicians (to a large extent).

      Much more likely is that top level business and political leaders know exactly what is happening in regards to peak oil/resources, climate change and the debt-burdened global economy. But they don’t talk about it. When asked by people that they don’t have a close personal relationship with or who they don’t identify as being “within their circle”, they are most likely going to “play dumb”, talk up the official BAU forever line of crap and otherwise keep their private thoughts and worries concealed.

      Those who make it into high level government, military and political positions are masters of understanding “the unwritten, unspoken” rules. These days, one of the main unwritten and unspoken rules is that you should not rock the boat or frighten the nervous masses with talk of impending economic collapse on an apocalyptic scale. Everybody who is anybody in high or even medium level positions of responsibility is going to most likely keep their big mouths shut on the topic of imminent collapse, and well they should if they want to maintain their positions.

      • Steve Rodriguez says:

        The first rule about Collapse Club is you don’t talk about Collapse Club.

        The second rule about Collapse Club is you don’t talk about Collapse Club.

      • ordinaryjoe says:

        If you work at Taco Bell and talk about collapse you wont have a job very long, let alone a higher paying job. Collapse would appear to be a subject that has taboos in place. Belief in alien abduction is more socially acceptable than belief in collapse. Taboos aside the subject of collapse generally is disruptive to personal paradigm and most seem to avoid the emotions involved with truth seeking,/paradigm disruption. I havnt had a television for a long time now, those correct paradigm distribution devices are quite painful for me to watch nowadays.. Can you imagine Gail’s work on television?- And now the finiteworld dancing girls :) When friends and family visit, they notice the uncomfortableness they experience in the absence of television. IMHO there is truth in the statement “the media is the message”. I feel every believer in collapse must also examine the possibility that he/she has adopted the paradigm for emotional reasons. I believe the argument for collapse to be empirical and science based but I am a human and I possess the humans tendency to create dream paradigms also.

        • Paul says:

          Had an interesting afternoon with a husband and wife who are both retired PHD psychologists and were discussing this phenomenon of how even when faced with irrefutable facts one is capable of denial.

          Long story short – they suggest this is a defense mechanism that helps one to preserve one’s ‘sanity’ and function in everyday life.

          Recall The Sopranos – the main theme of the series was the contrast between the brutality of the mafia don vs the family man – the conflict in Tony resulted in psychological issues including anxiety and depression. Basically to function outside of the gangster world Tony had to be in denial – recall the wife was confronted on many occasions in the series with having to deal with the reality that her husband was a brutal murderer. But she seldom allowed that to surface.

          In a similar vein, most people block out the end of growth scenario – or the limits to growth scenario – because it would mean depression – inability to go on with everyday life for most people – life’s meaning would be gone and they’d dwell on the negative constantly.

          So mentally they contort and block that out. And virtually nothing can breakthrough – until of course the nightmare situation occurs and they can no longer remain in denial.

      • Bullwinkle J Moose says:

        What seems to be missing is some sort of orderly shuffling towards the exits.

        • Paul says:

          Not sure there is such a thing as an orderly shuffle… or a soft landing.

          7.2 billion people without much in the way of food no matter what we were to do now is what we face.

          I think governments understand that – they know that attempting to prepare for the future is a) futile and b) will only create panic now.

          So they are doing the right thing – the only thing – kicking the can.

  3. Paul says:

    Another excellent article.

    I actually don’t think it’s very difficult to understand what is happening — if anyone reading the above doesn’t get it then they either don’t want to get it — or they are just not that intelligent and should go back to watching re-runs of dancing with the stars.

    A ten year old could be made to understand that expensive oil = the end of growth.

    • Stilgar Wilcox says:

      “…if anyone reading the above doesn’t get it then they either don’t want to get it…”

      I think the reason for this is most people (myself not included) put a lot of faith in authority, referring to TPTB as ‘they’. They must have a plan – they wouldn’t do this unless they knew what to do about it – they always have an answer. That type of nonsensical thinking allows people to not worry as much, but it is a misplaced confidence in a situation that TPTB can only do so much about. All ‘we in the know’ can do is make the information available and if most people ignore it, then let them go head long into the wall unprepared to finally gain a fast, harsh new understanding they were mistaken in their belief in TPTB. The same is probably the case with most past civilizations that failed. Only a minority really get it before shtf. .

      • Paul says:

        Agree – a few people I have spoken to on this understand the situation but have said ‘the governments would not let this happen – they must have a solution’

        I am sure when people on Easter Island became aware that they were down to their last stand of trees – they said the same thing

        Can’t let the facts get in the way….

        • Timothy says:

          I think the government has a solution. It’s just not one anybody would like. Remember that secret energy meeting of Cheney’s? Yeah, they know whats up; and their solution? Marshal law and repression. It seems each month another news bit comes out (if you’re looking at the right sources) about how another law has been written into effect that further deteriorates our constitution.

          • sponia says:

            If all we had to worry about was the imposition of martial law and more government repression I’d be ecstatic You have no idea what a full scale collapse looks like..Find someone who survived one already and ask them, if you’re brave enough.

            • Paul says:

              I was in Haiti on the 6 month anniversary of the earthquake — that was pretty much a total collapse. It was very grim and it remains grim — the streets were not safe at night – kids were being shot for taking food – thousands lived under blue UN tarps – gangs had taken control of the tent cities – rape and abuse was common.

              Now keep in mind this was nowhere near as bad as things are going to get because Haiti was and is still being supported by the international community – food, shelter, water and medical support is being donated.

              Now picture the entire world being in a situation similar to Haiti – but with ZERO help forthcoming. In cities there will be no food – no water – no power. Not for a day – a week – a month – probably forever. Do not expect the government to help – there will be very little if anything that can be done.

              You and your family will be on your own – you will have whatever food and water is in your house or apartment – and when that runs out what will you do?

              I read somewhere that having 3 months supply of food and water is a good idea – because by then most people will be dead – and there might be some chance to survive….

              One of the things one notices when flying into Haiti is that there are no trees – everything has been cut down. Now imagine what happens when people in places with high population densities have no electricity or gas for cooking and heating.

      • Lidia Seventeen says:

        Don’t forget all the people who (really!) think the God character would not “let” this happen. I know my own sister feels this way: Jesus will come back to clean up the earth or she’ll be raptured up, depending on the day you ask. That’s the “authority” the majority of people put “faith” in, if you go by the polls… a fictional character.

        • Paul says:

          I hadn’t though of that one! Conversely there also those who believe that God will punish us with the end of the world for our immoral ways – that we deserve fire and brimstone to be reigned down upon us. We certainly are very deserving of what is coming since we brought it upon ourselves.

        • Timothy says:

          I think a valid use and investment for wind and solar would be for powering the cooling facilities of nuclear waste. We are NOT going to be keeping the lights on for seven billion people, but at least we can prevent a radiation apocalypse. Is anyone aware of any effort toward something like this?

          • Paul says:

            Problem with your suggestion – how does one maintain very sophisticated systems – and obtain spare parts – when the economy that supports such technologies has collapsed?

            http://ourfiniteworld.com/2014/01/21/ten-reasons-intermittent-renewables-wind-and-solar-pv-are-a-problem/

            • Timothy says:

              My suggestion is for distribution for and only for the safe maintenance of spent fuel rods/waste. I understand that it takes a functioning advanced society to support this technology long term, However, given that it would be very specific to these sites, enough spare parts could be kept on site to keep it going for the 100 to 200 years needed for the fuel to cool enough. I have no idea what could be done with it once it is cool enough to handle and transport to permanent storage. But worst case, it stays where it is but with no more risk other than unknowing people entering the containment facility.

          • Ellen Anderson says:

            Not enough people are working on this but each of us should be calling and sending letters with suggestions and questions to our elected representatives. This is something that could actually get done in many places in the US and Canada. It is just that each facility is likely going to have to deal with its own waste on its own site. The Feds are not going to find a new Yucca Mountain.
            Decommissioning plants takes 10 years. Dry casking the spend fuel rods could start right now.
            This is something that your elected representatives could and should begin to do. They can’t “create jobs” and “deal with climate change” very effectively but they could do this! Hold them accountable – each in his/her own district. You don’t have to tell them you are worried about collapse, just an earthquake or an extended power outage. If anyone reading this blog actually wants to make a difference this could be it!

            • I agree wholeheartedly !

              Doesn’t the fact that this worldwide danger to life on earth has been allowed to mushroom, indicate that our elite leaders have never contemplated the possibility of collapse or even an extended power outage?

            • Peter S says:

              I’ve heard peak oil activists and professionals call for some type of “Occupy” movement to campaign for society change. But Occupy was still campaigning for more equality – basically, a better standard of living for society.

              Nobody has ever, or will ever, protest for austerity. Who would write to their senator (and which senator would consider it) to switch off nuclear power stations?

              I am very afraid that the majority will never accept peak oil (the limits of growth) or work together to change our society, because nobody will fight for less. To survive we must accept less, constantly, for years, maybe decades.

            • Paul says:

              There is and cannot be austerity – if we cut back on anything – stimulus – spending – energy consumption — that will accelerate the unavoidable collapse.

              We MUST have growth – regardless of how it is generated – even if it is a result of printed money – the minute that stops for more than a short period is the minute civilization collapses.

              Remember – if the price of oil collapses because growth slows then exploration will slow and stop – big oil will not look for or drill for oil if they can’t make a profit selling it – already Exxon and Chevron are cutting capex because they can’t make a profit at $110… if oil went to say $60 capex would be brutally slashed… and we’d be in a massive crisis overnight.

              If anything write letters telling your reps to print more – spend more – borrow more – because we are far past the point of no return on this

              Actually they already know this so no need to spur them on – see http://www.theguardian.com/business/2014/mar/28/uk-current-account-deficit-bigger-forecast

              I also saw a chart that global debt has done from 67 trillion in 2008 to 100+ trillion now – the governments are doing what is necessary to kick the can. And they will continue to do so – until the heaping pile of crap collapses.

              Better later than now I reckon. It’s not like it will a worse collapse if we pile on a few dozen more trillion.

              Total collapse is total collapse

          • Wind and solar power are not very long lasting–certainly in relationship to the length of time nuclear waste lasts. Wind needs a constant supply of replacement parts. Solar needs someone to be cleaning off the dust. Also if inverters are used, they are needed. But even the panels don’t last indefinitely.

        • xabier says:

          Didn’t someone in Bush’s circle say; ‘What does it matter, Jesus is coming again soon anyway?! If it’s not true, it’s still perfect!

        • I think we can all agree, though, that a miracle certainly would be convenient. The possibility of such may be our only way out. Or, even if it doesn’t give us a way out, such a miracle could give us a better way of dealing with the mess that seems to be ahead–better sharing, for example.

        • Peter S says:

          I have family members the same way.
          “Are you going to make some preparations, even limited ones?”
          “Well, I think we just have to trust the Lord. He’s in control.”

          Please keep in mind that in some way I believe in God, but even if I’m right (it’s just faith), God helps those who help themselves. He gave us brains to use, eyes to see, ears to hear and the rest of our body.

          • Paul says:

            Was speaking to a friend who thinks some sort of collapse is coming – asked him what he was doing – nothing he said. I suggested perhaps put a couple of months of food in stock — that might get you past the initial stage (most people will be dead by then) – and give you some chance of coming out the other side when more options might present themselves.

            His response – I’m not doing that (intonation suggested that was madness to consider such an action).

            When he and his family are trapped in their apartment with a week or so of food he may regret that… on the bright side, he’s high enough up where there will be an option to starving to death.

      • Agreed. Authorities must have a plan. Technology has saved us so far.

    • InAlaska says:

      Paul, I agree that this isn’t a very hard topic to understand. It gets a bit more complex when you weave into it the threads about which comes first: the economy or the environment, but anybody at the high school level should be able to grasp the basics of this predicament. The true problem lies with our desire for wish fulfillment. People want this to happen “in the future.” Not many people want to admit this could happen fairly soon. It is also a matter of your nature. Are you an optimist? Most optimists have a hard time grappling with something that is pessimistic by its very nature. They try and find the silver lining, even if they have to make one up! There is also normalcy bias. There is also herd mentality. If everyone else at home or at work isn’t panicking, why should I? Anyway, you know the drill, but you are awake, while most people around you are asleep. Dreaming that things are fine. When will the alarm clock sound? That is the real question.

  4. What are economists thinking? Some are starting to contemplate reality: http://theweek.com/article/index/258375/what-if-economic-growth-is-no-longer-possible-in-the-21st-century

    As for why many are so fragmented in the way they think, I believe it’s because these people’s brains are not able to think holisitically, to see things intuitively, to synthesize in a way that makes sense. The entire “system” we have is a 3 dimensional puzzle and the pieces are moving constantly. Those who can only focus on detail lack the ability to think holistically. It’s a mental handicap thing. It’s because most people’s brains are one dimensional. They’re mentally blind to the size, scope of the problems out there.

    Take Elon Musk as an example, he has the ability to use all parts of brain and look at his achievements, everything from PayPal, SpaceX, Tesla, SolarCity. Look at Bezos or Branson.All brilliant minds that think holistically.

    Gail I think you raise an incredibly important point. When we look at things we see the bigger picture, it’s easy for us. Those whose brains are wired differently are operating in the blind.

    Nice debate, we should shift to the psychological impacts more, we know what’s happening and why.

    • Harry says:

      From the article to which you link: “In his forthcoming book Capital, Thomas Piketty predicts that growth will slow to between 1 and 2 percent — 19th-century levels — by the end of the 21st century.”

      Last year the US economy “grew” 2.7% by borrowing 4% of GDP. Which classical economists blithely dismiss as “fiscal drag.” I would suggest that Mr Piketty is beyond optimistic.

      • Paul says:

        Remove the QE, the subprime car loans, the props on the housing market — GDP surely would be negative.

        • Lidia Seventeen says:

          Yes, I don’t get the pervasive notion that QE is not inflationary. Even folks hip to limits are buying this, not sure why. Best explanation I heard was that the funds were traded for “assets”, hence not inflationary! LOL!! The “assets” being debts that will never be repaid, of course.

          • Steven Newbury says:

            QE is redistributive rather than inflationary. The inflationary part already happened when the debt was issued in creating the “asset”. QE redistributes wealth from everybody to cancel out the deflation of the risk asset. Of course, in the real world this does mean that miss-allocation of resources go uncorrected, and sets up the “moral hazard” (where creditors assume they’ll be protected from default by the central bank) which encourages further speculative debt issuance which may well be inflationary.

    • Steve Rodriguez says:

      I agree with a focus on the psychology of survival.

      I can start with my recent experience. I recently wrote a series of three letters to my local newspaper. Superficially, the topic was local growth. As we who grasp the full dimension of a Finite World know, growth is a balance equation, not a linear positive sloped function, if we accept resource limits. So I included a theme that accounted for what to do should growth planning not follow the expected trajectory.

      After the paper printed the first letter, my wife said that few people would understand the economic complexities I addressed in the letter. I acknowledged the fact and ruminated several days as I prepared the next letter. I realized that I could not come right out and say we are all doomed. That is why I intellectualized the topic and planned to slowly exposse the real theme of the letters which was how do we prepare our community to live through the interesting times that are to come. But the more I tried to dance around the cold hard facts, the more I intellectualized even the process of creating an escape route, the more depressed I became.

      In hindsight I see that this series of letters required me to think deeply about sharing my personal collapse psychology with a community that I did not believe could truly hear or listen to what I was saying. I felt so alone with this knowledge. In the end, because I sincerely care about the outcomes and people close to home the exercise forced me to deal more personally with what collapse means. I was forced to accept the personal side of collapse in a way I had not previously.

      For two weeks I was an emotional zombie. I am not sure if this means I have reached the Kubler Ross acceptance stage, seems unlikey given the potential for horror an actual collapse would precipitate. But I have now at least a clear picture of the range of responses to expect from various sectors of the population: from catatonia to the vacant eyes of the refugee camps to the armed marauders and political opportunists.

      Believe me, I the depth of my grief approached very near the bottom, wondering about my own sanity, the accuracy of my perceptions. maybe my experience just revealed how precarious my grip on sanity would be in the face of an actual collapse? But I truly believe that I benefited from that brief descent into hell. Perhaps, when those who are putting off going through the five stages of collapse grief finally have to come to terms, I may make some small difference in their and my communities survival. I can say to them, yes this is really happening, you are not going crazy, you do not have to panic, there are things we can do.

      In my own case a as a resource manager, I actually do have some information that may be valuable. I have been preparing for this day since the 1970′s when I first realized that the oil would run out. I have carried that gloom around me this whole time. Some who scratch my surface see a darkness in me and shun me as toxic. I now know that that darkeness they think they see in me is just the reflection of their own unwillingness to see the obvious: that we all fear death. And that reluctance to confront the approach of death, either mine or the culture in which I am comfortable, is what scared me, what I saw in myself during the weeks I wrote the series of letters culminating in: “Prepare for interesting times. Should they not come to pass, then at least we have improved our communities, strengthened the heart, sharpened the mind. Store food – share what you can. Ask for help – we all have need. Plant trees. Do not pollute the well. Do not give in to rage or despair. Invest time locally – participation is ownership. Ride a bike. Make music. Dance. Wait your turn.”

      The only thing that matters is whether I can face the coming changes with composure. If I and a critical mass of the population in a given region can keep a their heads cool when TSHTF then half the battle is won.

      • Interguru says:

        Life is a crapshoot. The best you can do with your physical and mental preparations is to load the dice. I am resigned about myself but worry about my children and grandchildren.

      • xabier says:

        Steve

        What you have experienced is analogous to the old mystical path: which states that you must ‘die before you die’, in order to gain greater perception and – most important – greater capacity and effectiveness in this world to serve yourself and others.

        The Dark Night of the Soul – which is said to be very terrible – is a part of this – but only one stage.

        It has always been said that it is most dangerous to attempt this path on one’s own, as it can lead to permanent insanity.

        On the whole, we should be careful about thought experiments.

      • Thanks for sharing your interesting personal experience! I like your observations at the end:

        “Prepare for interesting times. Should they not come to pass, then at least we have improved our communities, strengthened the heart, sharpened the mind. Store food – share what you can. Ask for help – we all have need. Plant trees. Do not pollute the well. Do not give in to rage or despair. Invest time locally – participation is ownership. Ride a bike. Make music. Dance. Wait your turn.”

        The only thing that matters is whether I can face the coming changes with composure. If I and a critical mass of the population in a given region can keep a their heads cool when TSHTF then half the battle is won.

      • InAlaska says:

        Steve, your story is very interesting to me, as I feel like I have been carrying this burden of knowledge around most of my whole life, too. Sometimes it recedes into the background and sometimes it is front and center. During those front and center times, I take actions to prepare, which always makes me feel better. Then “the darkness” recedes again. Over many years now, my wife has begun to see things my way. That makes me a little sad because she was always the one who told me that I must be missing some piece of information that made this whole predicament unlikely. Now she and I are more aligned and that makes me feel like I have poisoned her naturally sunny disposition. However, it is nice to have a partner to work with as you go through this process of preparation. I would very much like to read your letters. Remember that you can only do so much for those around you, let alone a whole community. At some point, people have to be responsible for their own level of awareness about what is around them. All of this information is out there in the public domain to be discovered by those who are curious. We all found it. We did our homework and checked facts. We all decided whether this narrative was believable and even probable. Some of us take action and some of us simply witness events as they unfold. I would just say try not to carry the weight of this world on your shoulders. Only a small piece of it is yours to carry. Time on this earth is the only thing we really have. It is our most precious resource. Cherish it. Make good use of it. All else falls away. Best wishes to you.

        • Paul says:

          I saw an interview with I think it was one of the authors of Limits to Growth a few months ago — he came across as extremely bitter — for good reason of course because everything they predicted is happening as planned (albeit a bit earlier than expected) — and they have had to endure ridicule for decades.

          It must be extremely difficult to maintain any sort of positive outlook when the first thing on one’s mind each morning for decades is that we are headed for disaster. And no doubt that thought is never really out of one’s mind.

          I’ve only recently (as in the past 6 months) concluded that the end of cheap oil was the cause of the 2008 collapse — and understood that there is no way out of this – it’s only a matter of time (months — maybe a year or two) before the nightmare begins.

          I empathize with you in that it is difficult to be particularly positive about anything when the awareness of the above is lurking in one’s every thought.

          I find myself making no plans for the future under the BAU paradigm — not bothering to think long term with regards to investing, saving, business opportunities etc…. My main concerns are very short term — getting our small farm up and running (knowing that may be futile) – stockpiling tools, food and knowledge — getting a few last trips in hoping we don’t get stranded when the SHTF….

          Really this is not a very nice way to face the world – waking up each morning just being happy things didn’t start to implode. Sometimes I envy those for whom ignorance is an option.

          I cannot imagine going through decades of knowing — and seeing the train pick up speed as it careens towards the brick wall.

          • xabier says:

            It is difficult knowledge to wake up to every day.

            But isn’t Collapse-Awareness perhaps just a dramatisation, or heightened version, of our essential burden as humans, which is the knowledge that we are mortal, and our beloved children, grand-children, friends and lovers are also mortal and doomed?

            Add to that awareness, the menace of terrible diseases, and the seemingly limitless extent of human stupidity, cruelty and malice, and ordinary life in itself can seem to be as nightmarish as any collapse scenario.

            If we come to terms with mortality, we can come to terms with the possibility or, as many seem to believe, high short-term probability, of Collapse, without going mad or killing the joy that -one hopes – is still to be found in life for most of us in the more favoured parts of the world.

            The consumerist cult of instant gratification is the worst possible basis for reconciling one’s mind and expectations to this reality. What other belief systems are appropriate is for each to establish for themselves.

            • Paul says:

              I’d actually thought about that when writing that comment – how is this different than knowing that we all will die.

              Or the smoker who knows a pack a day will likely end in lung cancer and death.

              A few differences:

              - this crash is imminent – kinda like a smoker who gets a death rattle cough knowing what it probably is but putting off the doc appointment
              - what comes after the crash (if one survives) may make one wish one had perished immediately
              - the frustration of watching the train head towards the wall and knowing there is nothing one can do about it – that if we hit the brakes hard now – we actually hit the wall sooner.

        • Robin Clarke says:

          Life had already been grim for myself before I encountered the Limits to Growth (long before its predictions would eventuate). I find it disappointing that I find no-one here in uk who shares my (your) understanding of the coming transformation. The only companionship I find in this is sites such as Gail’s and Chris Martensens, and previously the Oil Drum. However, it has to be said that I have not so far been in a position to talk to any significant number of people about the matter. Most of my contacts are “green” activists (who already have false notions that tptb can be persuaded to sort things out) and the politically-involved (who likewise).

          • Peter S says:

            I have had the exact same situation. I’m British too, but not living there. I found out about “peak oil” 10 years ago, quite by chance actually. It worried me then, and the last few months it worries me even more.

            I told some family members, a few friends. Virtually nobody has listened, or even remembered I told them. I have had the same reaction as you and others who have posted comments here: catatonic stares, blind faith (“I prefer to be optimistic,” or “we have to trust technology and human ingenuity” etc.), fantasizing (“I’ll just buy an electric car,” “expensive oil will make everything profitable,” “we’ll just go to Titan and take the hydrocarbons from there”) or flat out denial. If I press it, people have got angry with me. One family member has accepted it, but only because he is quite religious (maybe an evangelical Christian) and he thinks it’s a sign of the “end times”. Nobody sees how serious, how seriously bad, this could very quickly turn into.

            And you’re right, green activists just imagine we’ll be living with a lot of electric windmills. I have had a lot of first hand experience with willful ignorance. People don’t know and don’t want to know. It’s quite a sobering experience, I see the world and society in a different light now.

      • Peter S says:

        People will never fight for less. And our society (as a collective) just won’t accept that the party must end. It’s self-destructive.

        • xabier says:

          Peter S

          Great point: no-one’ fights for less.’ And democratic mass franchise politics makes a point of always promising more, or has done for the last hundred years or so (while being hazy as to the details).

          I suppose the only belief system that makes ‘less’ something to strive for, heroically, is religious: St Francis of Assisi, etc.

          Even Soviet Communism promised material wealth and prosperity as the reward of short-term generational sacrifices and an austere and dedicated life.

          • Peter S says:

            I’ve heard it said before that right-wing/left-wing, capitalist/communist, are just two sides of the same coin. They are all systems based on growth. But you’re right, I’ve heard it suggested before, only religion has had success at making “less” something you desire.

            But if you think about it, they believed they were gaining eternal life in heaven. So even they were not fighting for “less”, they were still fighting for more, just not more here in this life.

            I’ve read some anthropologists and activists wondering how we can animate people towards an Occupy Wall Street style movement to change society in the face of peak oil. It’s ridiculous: who would protest for and chant “What do we want: no more iphones! When do we want it: now!”

            There will be no, or only a very limited, movement for austerity. The rest will look for any excuse, any rationalization, to continue our destructive system. That’s why protesting big oil is trendy now: “they’re rich, they’re polluting, they don’t care about us.” But nobody will give up their lifestyle that cannot survive without oil. They want the oil and the toys, but don’t want oil companies?!

            • Paul says:

              As Derrick Jensen points out in End Game – there is no compromising with the industrial society – because even the ‘greenies’ position remains tied into the eternal growth model. The only way to address this is to totally oppose the industrial society – by the use of violence if necessary.

              I’d suggest that would be futile and only land one in the gulag — and that even if one could succeed (let’s say a significant industrial terrorist group crashed the economy by starting massive forest fires in dry areas, ruined tourism by hitting airliners with RPGs at smaller less secure airports etc etc…) that would not solve anything – we are past the point of being able to solve what the industrial revolution has bestowed on us — all that would do is hasten the descent into dystopia.

    • The author of the article you linked to gets part of the story. The author misses the point that we cannot have a flat economy with redistribution. The flatness is likely to pull down the financial system quickly.

      • It’s a miracle Gail they’re even contemplating “the impossible”. They’re now starting think the impossible.

        Also with regards to redistribution, it’s the only solution we have left if we face energy deflation. We should at least try.

    • Scott says:

      Elon Musk – I will enjoy watching that smug delusional so-and-so’s whole world come crashing down.

      • I don’t agree with you there Scott. Musk says the most challenging problem we need to address is that of sustainable energy and that it’s our immediate crisis. Furthermore he’s doing magical things given his insane abilities and incredible brainpower. What he’s doing is nothing short of inspiring and serves as an example of what America can do.

        So what has he done that’s so incredible? Well he’s set up 3 “phenomenal” companies, not to mention his previous successes with Zip2 & PayPal before following his real passions to change the world for the better.

        1. SolarCity – Democratized Energy Production
        2. Tesla – Democratized Energy Consumption
        3. SpaceX – Insurance Policy for Civilization in the event of exctinction event

        So Scott I have to ask you, why exactly are you so jealous of him? I think if people read your comment it’s hard not conclude you’re a little bitter. Quite frankly, it’s a little sad you’re so jealous.

        “I’ll enjoy watching that smug delusional so and so’s whole world come crashing down”

        Elon (in my eyes) is a phenomenally motivated super-breed of conscientious entrepreneur. I’ve met the guy and he’s incredibly humble, intelligent and motivated.

        Does anyone else share bitterness towards Elon Musk?

        • Jarle B says:

          Given the insights in this blog, exactly what is great about Mr Musk and his companies?

          • Timothy says:

            2nd

          • He has managed to pump up the price of the stock in his company.

            • Peter S says:

              I’m not an expert like yourself on the workings of business, but recently it seems to me that we have a lot of big businesses (not counting investment companies, for now) that don’t produce anything, but their value is based on share prices and comes entirely from perceptions of what they will do in the future. Elon Musk’s company seems a big offender like this way. A lot of research, and talk of electric cars, solar cities etc.. Maybe you know something I don’t, but I don’t know anything profitable that that company manufactures or makes. It’s all based on belief, but never actually produces anything.

            • Paul says:

              Yes share price is often based on future outcomes — but generally it is also based on past and present profitability – if a company has never shown a profit — and the share price is spiking — that usually indicates a bubble – see pets.com and dozens of other similar enterprises… I’d also suggest twitter and tesla are very speculative plays — the main reason I would suggest their share prices are spiking is because the entire world is in QE ZIRP induced bubble – hot money looking for a good story.

              If the story doesn’t pan out – or the stimulus pulls back – the hot money runs for the exit…

        • edpell says:

          I enjoy Elon. I hope he gets us to Mars. I hope Solar City really does destroy the electric company. I hope Tesla makes a car I can afford to buy someday.

      • InAlaska says:

        Scott, I couldn’t disagree with you more. I like Elon Musk very much. I think he is the type of thinker that we need on this planet. If there were more of his type around, we just might be able to think our way out of this predicament, or at least delay it a good long while. I would not be surprised at all if he isn’t very much aware of the Peak Oil dilemma, and the interplay of the three E’s, and some of the efforts that he is doing with his various companies and projects aren’t geared toward engineering some solutions. Contrast his type of business model to some true old dinosaurs like Jack Welch and you get the idea. Musk comes across like a fictional character from Ayn Rand or some end-of-the-world tale about the one brilliant entreprenuer who tries and goes down swinging. If we are going to get an out of the blue miracle, it would come from someone like Elon Musk.

        • Paul says:

          No comment on Musk other than what he is doing is futile. Electric cars are not about to save the world – he’s like these people I encounter in Bali who think building with bamboo is the answer.

          They simply don’t get it – the industrial age ends when QE pushes on a string. Perhaps it might be useful to have a Tesla because one could salvage the battery and hook some solar panels to it and store a bit of sunlight – but beyond that they will end up in the junk heap along with BMWs, Toyotas, Fords and all other vehicles.

          • Without paved roads, I expect Teslas do pretty badly.

            • At least the guy’s trying Gail. He understands the problems we face as a species all too well. At least give him some credit even if in the long run it’s futile.

              With a mind like Elon’s it would be criminal for him to sit back and do nothing. He’s one of the few that’s making the impossible possible. What he’s done with SpaceX is incredible.

              He even admits himself rather humbly that even if the window of opportunity is small and rapidly closing, it’s still worth the effort and resources.

              To see his plans for Mars is nothing short of inspirational. Yes we know where things are likely heading but when I look at Elon I’m reminded of the fact we can still put up a magnifcent fight as a species when we want to.

              At every turn he was told most of his projects were impossible and every turn he’s proven his naysayers wrong.

              His understanding of physics and his ability to innovate is incredible.

            • Paul says:

              Building a competitor to Ferrari and Porsche is visionary? I see it as completely pointless.

              The whole Tesla thing is 100% based on the BAU model – everything that goes into making such a machine relies on the oil and gas economy – there will be no way to make any sort of car when the SHTF.

              As for Solar City etc we’ve been through this before here – solar power is an extension of the BAU oil and gas economy – when oil ends – the last solar panel will come off the factory line in China

              http://ourfiniteworld.com/2014/01/21/ten-reasons-intermittent-renewables-wind-and-solar-pv-are-a-problem/

              As for flying off to new planets – even if there were another planet like earth and we could get to it – what incredible ARROGANCE that we should think it would be awesome if humans could fly there.

              What – so we can burn that planet out as well? Isn’t one planet enough? Why do humans think we are so special and great that it would be great if we could live on.

              If any species of animal deserves to be extincted it is the human race.

              No disrespect to Musk – but he’s going nowhere with any of this — he may be deluded into thinking there is a workaround on cheap oil – there isn’t.

        • Peter S says:

          We live in the age of the “entrepreneur”. The entrepreneur is a hero in our society, even though they rarely actually produce anything. Does Mark Zuckerberg create? Did Steve Jobs do anything except increase exponentially our disposable culture, burning oil even faster and polluting even faster, and increasing our societal addiction to “things”? To date Elon Musk has not either. A lot of research, videos of reusable rockets, enthusiastic talks about electric cars and cities, publicity about vacuum trains, and a lot of oil burnt up doing all those. But nothing to get us off oil, and nothing to reduce destroying the planet.

    • Peter S says:

      In my humble opinion, you overlook blind luck. All those people are intelligent in some way, yes. But just because by chance they rose to the top (and most business is just fighting dirty), isn’t evidence of any kind of “hollistic thinking”.

      • “The harder I practice the luckier I get”………

        Elon succeeds in a way very few of us can precisely because he has such depth and variety of intelligence. He can synthesize and bring together DTB in a way very few can and be so damn sure about it that he takes huge bets.

        Agree to disagree. He’s the mozart of business in our eyes.

        • Peter S says:

          None of that solves the problems of the limits of growth. He is part of the growth.
          Elon hasn’t manufactured anything profitable yet, never mind anything to replace oil. But he has burned a lot of oil

  5. wredwards says:

    It might be instructive to consider whether the recent higher costs of creating oil production are the result of the necessity of producing that oil or, alternatively, the result of an opportunity presented by a high price that may or may not be justified by the economic need for that production. If the latter is the real explanation, then your expectation that current high oil prices will destroy economic growth – which it will – may not produce a deficit of supplies in the future. There may still be plenty of oil, just at lower prices.

    • Paul says:

      I may be missing your point — but if oil dropped to say $50 — I believe that would be the end of oil – Exxon and Chevron are already cutting capex because they are hitting too many dry holes and those with oil present expensive extraction propositions – with oil over $100.

      So if oil is $50 do not all oil companies collapse – because at that price they will slash new exploration completely – and oil companies live and die by their reserve banks – if those contract they wither and die.

      If that scenario played out that would quickly collapse the global economy and even if some oil could be extracted profitably at $50 (e.g. the older conventional fields) there would be no demand because there would be no economy – no jobs – no means to consume – only chaos.

      • The continuation of our society can only continue under the momentum of of our industrial complexity.
        Or…in everyday language, when we stop pedalling the bicycle of civilisation, we end up in the ditch. To stay upright we must pedal constantly faster , which is of course physically impossible
        the only available advice is : choose your ditch.

        • Timothy says:

          “the only available advice is : choose your ditch.” – While you still have a choice.

      • InAlaska says:

        I believe that some of the independent oil exploration companies can still make a profit at $50/barrel. Companies like EOG, Continental, and Pioneer, are all out there in the Bakken, Utica, Eagle Ford and Permian and making huge profits because their overhead is much lower. This may be the first time in history that staying small in the oil business works to your advantage because you don’t have to worry about huge payrolls, huge asset paybacks, and major dividend payouts of Big Oil. So, while I don’t believe that lower oil prices will be not be harmful, some of these smaller players may be able to keep us in the game for a while longer than anyone thinks.

        • Paul says:

          According to Heinberg that is not true – companies like Chesapeake are only making money by leasing sites http://www.youtube.com/watch?v=OIAFRzaHnb4

          And then we have this:

          Just a few of the roadblocks: Independent producers will spend $1.50 drilling this year for every dollar they get back. Shale output drops faster than production from conventional methods. It will take 2,500 new wells a year just to sustain output of 1 million barrels a day in North Dakota’s Bakken shale, according to the Paris-based International Energy Agency.

          http://www.bloomberg.com/news/2014-02-27/dream-of-u-s-oil-independence-slams-against-shale-costs.html

          • InAlaska says:

            The companies that I listed are not leasing sites, they are on them and drilling. EOG and Continental and Ensco are lean and mean and pretty nimble on their feet. I’m not saying that it’ll last forever, but they can do things the big oil boys can’t do because they are smaller, more efficient and less tied assets. If you doubt it, check the trajectory on their stocks in the last 18 months. They are making so much money on their sites (including old ones abandoned by the majors) that they wouldn’t dream of leasing them to anyone else.

        • Here is another story about how poorly the shale oil producers are doing. http://www.ogj.com/articles/2014/03/financial-questions-seen-for-us-shale-gas-tight-oil-plays.html?cmpid=EnlLNGMarch252014
          This is for small producers too. According to the article,

          Unless financial performances improve, capital markets won’t support the continuous drilling needed to sustain production from unconventional resource plays, Sandrea suggests, asking, “Who can or will want to fund the drilling of millions of acres and hundreds of thousands of wells at an ongoing loss?”

          More likely, he says, “Parts of the industry will have to restructure and focus more rapidly on the most commercially sustainable areas of the plays, perhaps about 40% of the current acreage and resource estimates, possibly yielding a lower production growth in the US than is currently expected—but perhaps a more lasting one.”

          I am not sure about the long-lasting part. By the time one gets rid of the constantly cash-flow negative portions, there isn’t much left.

          • Paul says:

            Thanks Gail – I haven’t drilled down to the nitty gritty — but I suspect there are some sweet spots that are profitable – but I suspect most are not …

            I don’t see why these small players would be any better at this than Big Oil — Exxon has been KILLED – BP says they can’t make money and are exiting… I don’t buy that these smaller companies are more nimble or efficient — if anyone can point to some hard data that demonstrate they know how to drill oil better than the big guys I’d be keen to see it.

            Perhaps these are some small fields Big Oil can’t be bothered with because they are insignificant in the bigger picture — flashes in the pan?

            My thoughts on shale:

            - QE ZIRP make this possible — huge leverage involved — higher interest rates would kill this
            - QE is sloshing around looking for yield and a good story (fable) – the industry has PR spinners out in force saying the US is Saudi Arabia 2 — total BS… but money loves a story so it pours in
            - If shale were a revolution where is Big Oil? Getting burned – BP says they cant make money and are out…. I read Steve Coll’s book on Exxon – copy of a summary re: Exxon’s experience:

            During the decade leading to 2012 Exxon was only able to replace 95% of the oil it pumped due to scarcity of new discoveries. Because of this they turned to acquisitions to replenish their oil and gas bank.

            In 2010 Exxon purchased a pure shale play XTO for $41 billion dollars.

            Exxon CEO Tillerson was criticized for the acquisition by the Society of Petroleum Evaluation Engineers in Houston because:

            1. there are considerable risks in shale plays
            2. reserves are overstated
            3. costs are understated
            4. the gold rush mentality destroys capital and rule of expediency over science and risk management

            “Uncertainty and skepticism of this kind leached out from geological engineers in the form of unfavourable press reporting , some of which went so far as to ask whether the American shale gas boom was some sort of Ponzi scheme in which early investors bid up faulty assets and lured in big money suckers like Exxon”

            “Unconventional gas wells behaved unlike other wells, and their decline and productions rates could be hard to calculate – an individual gas well might lose its productivity much more rapidly in the first year of drilling than an oil well would”

            The PUNCH LINE – Exxon paid $41B for XTO.

            Exxon’s market cap dropped $40B soon after.

            Shale is the biggest ponzi scheme since the dotcom boom – it takes ’25,000 new wells to produce the amount of gas that 5000 once produced’…. that’s straight off the Forbes site… When shale peaks – and many are saying it will as early as 2016 – add to that conventional sources around the world are overall peaked (see the Saudi article below) — then the cart tips over I reckon on the oil industry.

            Of course we also have all these financial fires around the world that could tip it over even sooner. A deflationary bust would mean oil prices crash – and exploration investment dries up.

    • Harry says:

      As I understand it, the high oil costs are largely necessitated by the high production costs. If the price of oil drops dramatically as the result of an economic contraction, it will stay in the ground. You may be making a more subtle point that I realise though.

    • I can’t understand why oil companies would bypass cheaper to produce oil. I don’t think they have any more options, other than expensive ones.

  6. Mike says:

    Reblogged this on This Got My Attention and commented:
    Good points!

  7. edpell says:

    wealth = (energy production per year)(efficiency)/(number of people)

    This is what I am getting out of the article. I am sure it is not linear like this but this is a first order approximation. Energy production systems that are cheap and fast to build are better than expensive and slow. Carbon release may be bad try to avoid it.

    This leaves three technologies to consider nuclear, solar, wind. It is argued that solar and wind are expensive, resource intensive, and slow to build. This I think will be an ongoing argument as the technologies evolve. They may become cheaper. This leaves nuclear, some form that does not use high pressure containment (the expensive part). China is building 20 expensive nuclear plants and doing development on cheap nuclear plants.

    You may say nuclear is about electric and we need liquid fuels and fertilizers. Nuclear is also a source of heat for chemical reactions to build liquid fuels and fertilizers.

    Can China, France, various middle east countries, India build nukes fast enough to stay above water. For India I would say no because I have not seen them doing much. Yes, they talk much about it but that is not enough.

    • The confusion most people have is that we really need to compare the delivered costs of all of the products, including storage for intermittent energy, and including decommissioning of nuclear sites without fossil fuels. Nuclear, wind, and solar are all very expensive, when all costs are included.

      The EROIs of wind and solar need to be compared to the EROI of coal (up near 50), since ideally that is what these devices replace. The fact that electricity is intermittent means that it really replaces the fuel, not the steady output we need. If the full comparison is made, as I believe it should be, I expect the comparison will show what a huge step up in cost these alternatives really are. Germany and Spain are already finding this out.

      • kiwichick says:

        bs Gail

        you seem to be overlooking the baseload renewables, geothermal and wave

        geothermal is essentially available world wide ; some places you just have to drill deeper

        wave is more niche obviously

        • timl2k11 says:

          “geothermal is essentially available world wide ; some places you just have to drill deeper”
          ?? Gail specifically mentioned wind and solar, but whatever.
          Geothermal is not immune to the resource triangle that Gail has showed over and over and over. For any resource we exploit the cheapest and scarcest first and then move on to the more abundant, but more expensive. We’ve exploited all the cheap geothermal. Sure there is plenty more if we drill 30 miles deep into the mantle. How much do you suppose that would cost Kiwi? Good EROEI?

        • Geothermal requires our huge fossil fuel energy to support it. How do you drill the wells needed for geothermal otherwise? How do you make repairs? How do you string electricity lines?

          • Paul says:

            How do you make fertilizers and pesticides – plastics – solvents – lubricants etc etc etc …. from geothermal?

            How do you transmit geothermal energy from source to cities without a massive grid – which requires massive fossil fuel inputs to build and maintain.

            I know we want to believe otherwise – that there is hope — but sadly, there is simply is no substitute for oil and gas. There is no way out of this

      • ordinaryjoe says:

        What if WIPP ceiling collapse has created radiation levels high enough that no personnel can enter the facility to decontaminate? No one has entered the facility since mid Feb. The whole plan in its entirety for nuclear waste seems to be to put it somewhere temporarily until some totally unplanned, unbudgeted facility that the technology doesnt yet exist for comes on line. What if WIPP, best storage we have but “temporary”, just became permanent storage? This is PLUTONIUM. Add cost of storing half life plutonium 250,000 years. nuclear energy EROI as currently implemented is NEGATIVE. WIPP facility $US 3 billion, end of all life on planet priceless. It is clear that the fiat and derivatives created exceed the value of all resources on the planet. Does the debt of our nuclear waste containment also exceed the value of all resources on the planet? Fukushima, Chernobyl, WIPP; first payment is due now on the note, and we are refusing to pay, foreclosure is the end of our species and the vast majority of species on the planet.

        • Paul says:

          Good summary of the deadly risks – and costs associated with nuclear energy – if anyone survives when the SHFT and the spent fuel ponds explode nuclear energy will be remembered as the worst idea in the history of man.

        • VPK says:

          The roof collapsed! Boy, are we in trouble. Well, seems that wrap things up in storing these drums there for thousands of years. Surprised I did not read or hear a report about this “event” in the news media. When the contraction begins these “sites” will be ‘forgotten” and left on their own.
          FRACKING near this site!? Are we stupid, and then they wonder why?

          • ordinaryjoe says:

            The facility is divided up into smaller individual caverns carved out of the salt. Once the individual cavern is full it is sealed with steel and concrete. What appears to have happened is the individual cavern that is open and being loaded had at least a partial roof collapse and that collapse ruptured at least one container containing nuclear waste. Arnie Gunderson in the video above presents the facts much better than I can. The facility is continuing to be ventilated. Whether the facility must be ventilated for some safety reason or they are using this as an ad hoc decontamination method by scrubbing the facilities air by pushing it though the HEPA filters and releasing what the HEPA doesnt catch into the environment of north Texas is unknown, I forsee a long period of time where very little information is released about the nature of the facilities condition with the only real time monitoring and disclosure of plutonium releases done by private concerned citizens such as radcast.org. The distance from the release point through the facility to the point of exhaust is considerable and there is no precedent or established procedure of a plutonium decontamination effort in a salt cavern let alone one of this size. The facility was designed and operated on the premise that a leak would not occur.

            The greater question is whether the whole concept of geologic repositories for nuclear waste is safe. There is a deep seated emotional concept amongst humans that burying things as well as tossing them into the ocean is the ultimate solution whether it be garbage, corpses or nuclear waste. Germany has determined its two salt cavern geological repositories to be unfeasable long term storage methods and is planning to pull its nuclear waste from them. The billions spent at Handford for decades trying to turn the waste into glass blocks seems to be dead in the water. As no permanent solutions exist, what is needed is the best temporary solution possible. The tricky part is that the strongest containment does not lend itself to access to the nuclear material in the future when that containments limits are met as a function of time. If its encased in 100ft of concrete and a foot of steel and it leaks what do you do then? The premises of of infinite growth is that resources will always grow and with them technology. Finate growth is perhaps contestable within the next generation but uncontestable in terms of the thousands of generations of safety hazard that nuclear waste represents. We might be best off to accept that the resources and technology in the future will not be more capable in the future and to contain the waste to the best of our abilities now. Perhaps a less strong containment that allowed more flexibility in accessing the waste in the future might be a better choice. Our best minds and what resources we have left should be focused on this question but instead the question does not even exist. Vacumn. As it is the majority of the weapons waste is at WIPP and the majority of all power plant waste, in most cases all the waste the plant has produced, is stored in swimming pools at the plant. It would seem obvious that dry casking would provide much better containment after the spent fuel cooled in the pools while retaining flexibility of further containment options in the future. Requiring dry casking as a better means of containment in situ would seem to be important from a standpoint of survival of the species on the planet yet there is no discussion let alone action.

            • Interguru says:

              We cannot wish the existing waste away. We have to put it somewhere. Even with the collapse, the far underground WIPP seems the best we can do. Any better ideas?

            • VPK says:

              Thanks for the follow up explanation and it seems we are just kicking the can down the street for the next generation to worry about it all. Dr. James Hansen seems to think next generation breeder reactors would solve the problem of “waste”. Question, is there time?
              Ms. Tverberg seems to think not, nor that it is economically feasible.

            • InAlaska says:

              If you think our situation is bad (and it is) think how much worse the containment system is in RUSSIA. It doesn’t take a failure at our site to facilitate global radioactive contamination, it can be a site in Pakistan, India, North Korea, China, Russia. I’m sure the WIPP in the Carlsbad is a paragon of excellence compared.

        • Interguru says:

          In previous blog discussions, I argued that the meltdowns would be a local, not a global problem.  To prove my point I conducted a what if thought experiment: in the style of XKCD What If  
          What if all the nuclear reactor core radiation was released and spread evenly around the world?

          There are about 500 reactors either in operation or under construction worldwide.
          Radioactivity is measured in “curies.” An average operating nuclear power reactor core has about 8 billion curies at its core, which is equivalent to the long-lived radioactivity of at least 500 Hiroshima bombs. In comparison, a large-sized medical center with as many as 1000 laboratories in which radioactive materials are used, has a combined inventory of about 2 curies
          This makes 4 x 10^12 total curies in all the reactors in the world.
          Dividing by the 57,506,000 square miles on the surface of the Earth Gives  70,000 curies/
          square mile This compares with 17 curies/square mile naturally occurring in the soil.

          These numbers are a WAG (wild ass guess).  If all reactors melted down, most of the contamination would remain relatively local as it has for Chernobyl and Fukushima ( Yes there is ocean contamination in the latter and airborne contamination in the former, but the vast majority of the curies are still in place ).  On the other hand the numbers do not include 70 years worth of nuclear waste. The heat ( and assumedly the curies) from the waste decreases to 0.2%  of the original a week after shutdown, but there are very toxic isotopes such as  Strontium-90 and cesium-137 and  Plutonium-239  which last centuries or millennia.  You can wave your hands all over the place but this will not change the almost 5,000 to 1 discrepancy
            I started this calculation to prove my opinion that even under the worst conditions total nuclear meltdown was not a global problem, and instead  I disproved it.
          It has not changed my mind, since I was against more nuclear power anyway, for different reasons, but that is another posting.

        • I am afraid we will get to see how this really plays out.

    • Steve Rodriguez says:

      Planning for nukes ignores both certainties and uncertainties of very hard intractable social and ecological complexities. What we need is a “bridge source” that will tide us over until we figure out how to do with much less energy (a variety of strategties from relocation to reforestation). In the end we will be depending upon thermal mass combined with combustion. Of course this is only sustainable at a fraction of current populations. Coppicing and silviculture will be the basis of our energy production.

      We are all resource managers now.

      • Steve Rodriguez says:

        I meant to add to the above that solar might be a reasonable bridge energy source, though marshaling the will to implement is in doubt. The unsustainability of PV is a long term certainty however.

  8. Doug W. says:

    Why aren’t governments and citizens more attuned to what is happening with energy and growth? A lot of it is distraction, and the fact that contraction of the economy and slow growth does not fit in with our cultural construct of progress and growth. In Roman times, it was “bread and circuses” that distracted citizens and the political class. Today it is television and a faster pace of life. And energy realities, etc may not “compute” with the our world view. There are a lot of delusions floating around these days.

    • The same reason people wont acknowledge their own death. We know we’re going to die but the thought is so terrifying to some we make up silly stories about the afterlife and all else that comes with it.

      As we push into 2015-2020 and the new “energy decline phase” expect to witness even more delusional activity across the board. Had it not been for unconventional we would have started the “energy decline phase” in 2008. We actually hit the plateau and have been there ever since. 2015-2020 is when the wheels fall off in the Western world.

      If Russia decides to abandon the West and partner with China, India, Iran, Brazil, expect the expedited collapse of the West.

      G7 minus Russia are playing a dangerous game.

      Putin/Chinese also understands the energy trap and it’s interesting to see Putin making his moves.

      Western politicians are in panic mode.

    • Interguru says:

      This whole discussion is so depressing I am tempted to log off, turn on CNN and listen to the continuous blather about the fate of Malaysian Airlines Flight 370. I can’t believe their ratings are up.

    • I think you are right. People are busy with their lives, and don’t think about big problems. The model is not to dig too deeply into what is happening.

      • InAlaska says:

        If we dig too deeply, we discover the Matrix and then we need to decide whether to swallow the blue pill or the red pill. I’m afraid that either way, we are going down the rabbit hole.

    • Peter S says:

      When have governments and citizens ever been attuned to what is happening?

      • interguru says:

        Europe creaking at the joints. An interview with George Soros . He is not too optimistic.

        • Peter S says:

          Very interesting interview, with a very interesting man. I was already interested in Soros, but now even more so. Especially with his “human uncertainty” theory, people functioning as particles and waves, individuals and as collective movements. I’m studying anthropology and this interests me a lot.

          “Even with oil over $100 a barrel, which is the minimum Russia needs to balance its budget, it is not growing.”

          That’s very interesting. So if the price of oil dropped, what would happen in Russia? Nothing good I would imagine.

          “Iran has, after Russia, the world’s second-largest reserves of natural gas;”

          I had already had my suspicions that energy was the cause of the West’s sudden change of heart towards Iran. They tried violence in Iraq – that hasn’t worked. Now it’s time for soft power, a peace initiative – it seems to be having more success.

          • Paul says:

            George seems to neglect the obvious – that oil under $100 will wreck an already unprofitable fracking business in the US – and lead to even less capex from Big Oil as they cannot make money even with oil at 110.

            He also fails to mention that no economies are growing sustainably – only trillions of dollars of QE and ZIRP are keeping the global economy out of permanent recession – due to $100+ oil.

            Rock and hard place George. No way out

            • Peter S says:

              One man’s meat is another man’s poisoning. All these things that are leading to “the limits of growth” are mostly the same things that have made him very successful at what he does.

              And I’m sure he does think about energy and its worth, he’s probably not showing all his cards.

            • Paul says:

              Indeed – what someone like George says for public consumption is likely to be very different than what he actually believes – or is positioned for or against with his fund. A media appearance like that is just another tool in the PR box that helps manipulate the markets in a favourable direction for Mr Soros.

  9. Jens Bryndum says:

    Psychologists George Lakoff and Drew Westen http://www.linktv.org/video/2142/deceiving-images claim our intellect just rationalizes, what our emotions want.
    I really do believe that most people have a part of their brain that actually knows these limits-to-growth things at some level – the knowledge is just very unpleasant, so they dont want to know – and then they don´t.
    I remember writing in an exam essay about the future in 1975 at age 19, that we´d be in trouble if we kept growing population and resource-consumption. I felt smart writing it, but now I think I may be a bit deficient in the emotional department, and this deficiency is possibly why my mind allows me to know what I know….
    So – if this is true most people will move swiftly from denial to panic at some point.
    Don’t see any way around it.

    • Harry says:

      A friend drew my attention to an interesting blog by author Reg Morrison today. He has some interesting things to say about the human capacity for rationalisation and its origins. He says we possess:

      “…an automatic override device that cuts off rational thought at a moment’s notice and draws directly from a reservoir of pretested genetic behavior, we remained fully functional animals. It enabled us to continue to feed, mate, and reproduce without interference from our enlarged cortex. To put it yet another way, our neuronal circuitry remained ‘hot-wired’ to our genes so that we would not be handicapped by logic when genetic responses were called for.”

      http://regmorrison.edublogs.org/1999/07/20/plague-species-the-spirit-in-the-gene/

      • Harry says:

        And whilst I’m busy throwing around links. David Korowicz, whose excellent ‘Trade Off’ paper is often referenced here in the comments section, has a new interview up: http://www.feasta.org/2014/03/17/how-to-be-trapped/

        Among many other fascinating insights, he makes the point that, although the global economy is human-made, it is not human-designed and is not, in anything approaching its totality, controllable by humans. It will continue to greedily hoover up resources until it can’t. Our politicians perhaps understand this relative powerlessness better than many.

        • timl2k11 says:

          “It will continue to greedily hoover up resources until it can’t.”
          This is very true and important. I think it means that we will find ways to continue BAU until we can’t. What that means: on the plus side, BAU will last longer than even those with the best information and who are the most realistic expect, but on the minus side collapse will be much more dramatic and calamitous than these very same people expect.

        • Thanks for the link. I hadn’t read that one. Politicians need to preserve the view that they are running the show. Physics is what is running the show, but they can’t let that on.

      • That is interesting. It was posted back in July 1999–before the current wave of interest in the subject.

    • It may be that people at this sight are in general more analytic and less emotional than most.

      I was a math major in college and graduate school and have real difficulty reading a novel from start to finish. I prefer books with lots of charts and subheadings, so I can pick out what I want to read, and read it quickly.

      • I love analytics and data, so much so creating an Intelligence Platform
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      • Robin Clarke says:

        It may be that people at this sight

        You mean “this SITE”!

        I was a math major in college and graduate school and have real difficulty reading a novel from start to finish. I prefer books with lots of charts

        In other words you’re an outright nerdess – you may as well admit it Gail!

  10. Eivind Berge says:

    It is acknowledged by the mainstream media in Norway now that we are headed for an oil crisis due to rising costs:

    http://www.dn.no/energi/article2781396.ece

    However, it also says there is plenty of room to cut expenses. Basically, people in the offshore oil industry work only 17 weeks out of the year and make $180,000, according to that article. They work for two weeks and then they get four weeks off eight times per year. It shouldn’t be necessary to collapse directly from this kind of luxury to nothing. No doubt one could offset several years of diminishing returns just by paying oil rig workers the same as a comparable job would earn them in other industries, which means their wages could be cut by nearly two thirds. Evidently it hasn’t even occurred to the oil industry to be frugal before now, because they have been used to nearly unlimited cash flow, so I am sure there are many ways they could be more efficient if they only tried. I am also wondering if there might not be a plateau somewhere, in the rate of diminishing returns, if the market could tolerate a higher oil price. Would costs still increase by 10.9% per year when we get to the point where oil needs to be $200, for example? Must this trend continue indefinitely without interruption? I also saw an oil analyst claim the market can tolerate a higher oil price as long as it happens slowly, which makes sense.

    • Paul says:

      I’ve seen the comment that the market can handle a slowly increasing oil price as well.

      However how does the market handle an increasing oil price when the average income of a person in the US has decreased by almost 10% in inflation adjusted terms in recent years? The numbers are similar across OECD countries.

      Sure – if wages were going up at a rate equal to or at least very close to the increase in the price of oil that might work out – but not when wages are headed the other way.

      Oil went from $12 in 98 to $38 in 2001 – and its generally over $100 these days. Wages have been flat to lower during that period – that translates into people having less money in their pockets so they buy less which slows or reverses growth.

      Hence the money tap was turned on in 2002 and has not been turned off since with QE and ZIRP – the market is unable to handle these high oil prices – so of course stimulus is required – subprime auto loans are required – propping up the housing market with ZIRP cash is required.

      After 2008 when oil hit a record high of $147 central banks simply did more of the same but on a grander scale – this time they started printing money – this demonstrates I think without a doubt that the market is unable to handle these high oil prices. The markets need drastic policy – or we collapse into a deflationary spiral.

      This economic engine does not run on 100 buck oil let alone increasingly higher prices that will be required to get big oil to turn a profit on new exploration and extraction.

      Exxon and Chevron are already starting to cut capex because of this – as conventional fields deplete the vice will be turned ever tighter because almost all new oil supplies being found are from non-traditional source (fracking, deep sea, tar sands) and already arguably these do not make sense at current prices.

    • Paulo says:

      Eivind,

      That is a ‘let’s cut the other guy’s wages so we can do better’ kind of argument. I got news for you, no one will work on an offshore rig for town wages. No one will work in a remote tar sands plant for town wages. Would you? I wouldn’t.

      Paulo

    • I expect that wages make up a fairly small portion of total expenses. Also, the high wages in part reflect certain realities: people working at this must work out on platforms away from their families, in harsh conditions. I know in many parts of the world, the families of workers live at a distance. For example, I have heard of workers in Alaska living in Hawaii, where the time-zone is similar, but the weather is much better. Part of the high wages are to cover commuting costs. Even in places like Stavanger, living costs are very high.

      I don’t know about the Norwegian situation, but in general, a lot of costs reflect a world market. If Norway cuts its pay, there may be work in say, Saudi Arabia. Of course, if the total number of workers is cut, as seems likely, pay levels may drop, at least somewhat. This cut in pay may cut out a little of the rise in costs, but it won’t get around the basic issue of depletion, and finding little actual oil with all of their efforts.

      • InAlaska says:

        Gail, that is correct information. Up on the North Slope at Prudhoe Bay the oil guys work 2 weeks on and 2 weeks off. The companies fly them between Anchorage and the Slope each shift. I know several folks who then grab a flight to various places in the lower 48 and Hawaii for their 2 weeks off.

  11. Christian says:

    Here, petroleum workers earnings are in the 60 KUSD/year, before taxes. HC and mining provide the best wages, as everywhere I suppose. It’s interesting wages tend to decay along with their distance to the oil and transport core. After petroleum, bus and truck drivers, auto makers and heavy industry occupy the second level. With a few exceptions, next come the working masses.

    Calista, I forgot to mention the suspension of cash withdrawal, I suppose I found it to be obvious. That’s when people get upset and commerce start retracting. At this point, food supply chain continuity is essential, but not sufficient at all. When some people already out of credit get also out of cash, that’s the moment for violence. In 2001, at first here violence was directed by the middle class against banks, which are armored and so not even police was really needed to protect them. Some days after that, mostly lower class started attacking retails and supermarkets, and that were real problems. I suppose most all social security services have a far greater delay and may react just after a month, or more. In case this would to replicate, it seems difficult any government failing to fill this gap could survive.

  12. Calista says:

    I begin to wonder if the reason QE was chosen and continues to be chosen is because the flattening of income disparities as one of the referenced articles above suggests as a solution would bring on collapse that much faster. QE means the dollars go into the financial world and get shuffled around on paper but don’t actually seem to result in more of the average person consuming oil or other consumer products. If we all had more spare income wouldn’t we just increase our “living standards” and consume more at a faster pace? Wouldn’t that more quickly expose that the emperor is standing in front of us starkers? Using QE means that economy is sort of propped up, the image of “all is well” is maintained while the middle and lower classes experience demand destruction but it is ‘their fault’ because they’re poor and so we still see pronouncements of the Emperor’s new set of duds for this season’s fashion show.

    I shall note. This may be a naive question. I’ve just never thought it through before with those two choices balanced against each other.

    • There are two big variables in the economy (1) energy prices and (2) interest rates. As energy prices go up, politicians have to bring interest rates down to keep the system from falling apart. It does mean that large purchases can more easily be made. So the low interest rates prop up our current system.

  13. Pingback: Oil Limits and the Economy: One Story, Not Two | PRACTICAL TACTICAL

  14. Pingback: Oil Limits and the Economy: One Story, Not Two | Basic Rules of Life

  15. Reblogged this on Olduvaiblog: Musings on the coming collapse and commented:
    Another great article by Gail Tverberg:

  16. Don Stewart says:

    Dear Gail and Others
    Elon Musk has managed to turn a small automobile company into a Wall Street powerhouse. Therefore, you might be interested in what he has to say about metals and batteries. Those comments start at about 1:50 in this video. The first two minutes are in praise of solar PV.

    If you want to see a story of ‘metals depletion’, then check Ugo Bardi and ‘Extracted’. For the opposite story on solar PV, see any of Gail’s posts.

    Don Stewart

    • timl2k11 says:

      He addresses the metals used in batteries, but those aren’t the only metals needed to make an electric vehicle. The problem Elon faces is scalability. As soon as he removes the battery bottleneck he will simply run into another. Same problem with solar, scalability, it’s not there. And Tesla is still a small automobile company, regardless of what Wall Street has to say.

    • Brilliant! A bitter twisted chap called “Scott” above hates this guy??

    • What Elon Musk doesn’t understand is the fact that we have to keep the whole economy together, to be able to have the roads to operate the cars, and to return the recycled batteries. Keeping the whole economy going just can’t be done, with current oil and other resources. There are just too many ways diminishing returns affect the economy.

      • St. Roy says:

        Gail, you make a good point here. Vehicles and all the rest of the techno-gadgetry that we use daily to live our lives require a huge world wide energy-intensive infrastructure and supply chain to function. When too expensive energy removes a few or even one of the components of this complex system, the whole thing shuts down (Liebig’s Law). Musk and others like him that are fixated on one-off technical solutions to the world’s energy predicament usually fail to see the big picture. I read yesterday that a smartphone requires more energy per year to operate than does a standard home refrigerator; a good example of how technophiles miss the point of declining net energy and it’s ramifications. Elon wants to pave a quarter of Arizona with solar panels to supply all of the USA’s electrical power needs. Sounds great until your start adding up all the resources needed to do that and keep it operating.

        • interguru says:

          A new 18 cubic foot high efficiency refrigerator use 492 kwh a year. Divided by hours in the year, that comes out to 56 watts continuously. The phone would be too hot to carry. I suspect the number comes from the energy used by the needed servers.

          This may be more than compensated by the reduced driving from meeting on Facebook rather than then mall and ordering online instead of driving to the store.

          • St. Roy says:

            Hi Interguru: Here is my source: http://www.huffingtonpost.com/2013/08/20/iphone-energy-refrigerator-controversial-study_n_3782211.html I am a biologist, not a physicist, so you might want to critique the info.

            • Interguru says:

              I am a physicist ( who has worked at the Human Genome Institute ). I read the background articles. All the claimed energy is at the server transmission end as I suspected. I am not going to delve deeper, but I find the numbers do not pass the smell test.

              One thing that makes me suspicious is Luke’s statement “each GB requires 19 kW. That means the average iPhone uses (19kw X 19 GB) ” This contains a mistake that should not get past a high school physics student. He uses kW ( power ,a rate of energy ) instead of kwh ( an amount of energy ). It’s like mistaking monthly salary for a single amount of cash ( without noting how many months are involved. )

            • I think that downloading movies is part of the high electricity cost. Perhaps less bad otherwise?

      • InAlaska says:

        I daresay that Elon Musk probably understands the whole debate that we have going here on this site and were he to participate, would probably be the smartest guy in the room. His mention of collapse indicates that he has at least thought about this and so it leaves one to wonder where is the disconnect. Is it him? or is it us? and why?

        • Paul says:

          I know a lot of highly educated people (some of them smart) who agree collapse will likely at some point – but ‘not in their lifetimes’ — so they go about their lives not thinking about this — instead they are focused on dancing while the music plays i.e. building their careers – building their businesses – charging ahead chasing after more.

          I doubt Musk is much different – Tesla is his latest dance move and money spinner —- if he actually thinks electric cars will in anyway help solve the problem of the end of cheap oil — then he most definitely is not the smartest guy in this room

          Tesla is a waste of money and a waste of time — it is basically an extension of BAU because without BAU it will not exist.

          If he wants to do something useful with all his cash and vision perhaps he could work out how to regenerate soil that has been farmed using chemical inputs —- in a cheap and efficient manner.

          I’d suggest that Joel Salatin is a far more important innovator — but then he’s just a grubby dumb ol farmer — he doesn’t make sexy cars and get invited to lunch with the Wall St crowd …. :)

    • Peter S says:

      Correct me if I’m wrong please, but his company is now a “powerhouse” only for shareholders. It doesn’t produce or manufacture anything profitable – except to shareholders. It’s based on the belief that his company will make space profitable, will make electric cars popular, will create electric cities. But it has not yet. So it is a powerhouse company that creates nothing.

      I think Gail below stated well what Mr. Musk doesn’t realize regarding globalized economies and the limits of growth.

      • Don Stewart says:

        Dear Peter S
        I am not personally persuaded that Elon Musk has any really good ideas. But you do have to admit that he has made a hit with Wall Street, in terms of the valuation of the stock.

        To me, the most interesting question is ‘why does Wall Street think so highly of his companies?’

        If you are one of the pessimists, you might think that some entrepreneur who had invented a better way to weed a garden might be a better investment than an expensive electric car. But that is certainly not the way Wall Street is thinking. Is it Mass Delusion?

        Don Stewart

        • Peter S says:

          Dear Don
          Wall Street also highly values Twitter. So Wall Street is hardly an indicator of worth. I would certainly say it’s one type of mass delusion. And if the global economy really does have total collapse, the man who discovered a better way to weed will be the winner.

          • Paul says:

            Agree – Musk is hardly a visionary – he’s focused on developing things that will not exist in the very near future. He is blinded by the belief that technology will overcome.

  17. David Roberts says:

    while oil limits and limits on other resources are a problem, the real problem is continuing population growth and populations increasing their standard of living and demanding higher living standards. No government is prepared to mention the population growth problem, indeed Australia is basing its economy on increasing population

    • kiwichick says:

      +1 dave

      I=P+A+T

      you can’t leave P out of the equation

      the Global Footprint Network estimate for sustainable population globally based on 2007 data is
      4,4 billion

      • So what’s going to happen when we hit “Phase 3 decline” 2015-2020?

        • Interguru says:

          To everyone predicting the timing of the collapse:

          I repeat a previously posted comment:

          Stein’s Law: ” Things that can’t go on forever eventually stop”
          Two lemmas ( mine — Interguru’s Lemmas )
          1) They go on a lot longer than you think they can.
          2) They stop suddenly without warning. Even those who see it coming have no idea when.

          Pay attention to lemma 1

          • Maybe we will be lucky, and things will go on longer than we think.

          • InAlaska says:

            I do believe that our system is more robust than we on this site give it credit for. When we are talking about survival, just like any creature, the system will cling very hard to life. Governments, corporations and individuals will do unexpected things, perhaps even unprecedented things, perhaps altruistic things that run counter to their own interests, in order to ensure the survival of the whole. Because of this, I think that prediction based on what we do know while tempting, is a tricky business. This is primarily so because there is a whole universe of things that we don’t know.

            • Paul says:

              Agree.

              The decision makers saw the result of standing back when they let Lehman go — and I am sure they are committed to doing anything no matter how insane (case in point China has printed 15 trillions dollars and is continuing to print so as to make loans to insolvent entities so they can make payments on loans they otherwise would default on) including engaging in illegal or unethical activities.

              Whenever we see an alarming headline in the MSM assume the central bankers will hose down that problem with more money – the will not let anything fester..

              Of course everything will seem stable – but then overnight you get your black swan – and the house of cards falls. Impossible to predict when or what the trigger is.

              Assuming there is truth in the claim that countries like Japan, Italy, France, Spain, China are too big to bail — then I agree with Gail when she suggest two years max before something snaps.

              Japan increased their printing volume dramatically last year — and this is starting to push on a string (as expected) — and they are about to increase taxes — that is going to crush the economy — so what do can they do next — print even MORE trillions? At some point surely there is a bust up…. What is the limit – 50 trillion – 100 trillion?

              “The total world debt in 2008 was said at the time to be 67 trillion. That debt represented excess claims on underlying real wealth (nature, including human social capital). Some of the extant derivative instruments took hits in 2008, but it was short lived, and even greater derivative fraud has been the rule for the past 5 years. We just passed 100 trillion for current total debt, a growth rate of 50% in 5 years or a doubling time of slightly less than 10 years (approx. 7% annually). So world debt, on present trajectory, would be double that of 2008, or 134 trillion, by 2018. If that could actually happen, by 2018 we will have added more debt in 10 years than all the debt previously run up in the history of economics. But it is all fraud. There is nothing to back that debt. It exists solely on the illusion that it represents reality. Reality: it is ones and zeros in the cybersphere. It is literally a confidence game.” http://peaksurfer.blogspot.com/2014/03/springs-eternal.html

    • Continued population growth is certainly a big part of the problem. Actuaries depend on population growth, in order for planned future scenarios to work out–you people to support the older ones.

      • How on earth is the actuarial profession holding up in Japan! They’re “depopulating”

        • I haven’t been in the “life” actuarial practice, so I am a distance away from those things. I have been on the “property casualty” side, which includes things like auto insurance, workers compensation, and medical malpractice.

          I would expect on the life insurance side, there are individual policies sold. These would be funded based on expected investment income and expected mortality rates. I would expect the problems to be mostly on the investment income side–interest rates have been too low.

          Most (nearly all) government sponsored pension programs are very close to “pay as you go”. These are the ones that run into problems, when there are too many old people relative to young people. I know Japan runs huge deficits. I don’t know whether pension payments are part of the problem.

  18. concerned says:

    I’ve been following peak oil for a few years feel like I get it (not a denier). I’m just wondering if people here have been following the stories about new discoveries of catalysts that may make Gas-To-Liquids more affordable?
    MIT Tech Review: Chasing the Dream of Half-Price Gasoline from Natural Gas: [url]http://www.technologyreview.com/news/523146/chasing-the-dream-of-half-price-gasoline-from-natural-gas/[/url]

    quote: If Siluria really can make cheap gasoline from natural gas it will have achieved something that has eluded the world’s top chemists and oil and gas companies for decades. Indeed, finding an inexpensive and direct way to upgrade natural gas into more valuable and useful chemicals and fuels could finally mean a cheap replacement for petroleum. (end quote)

    A company named Siluria has been working with a new process to develop and test catalysts to convert NG into gasoline. They say they’ve tested over 50,000 catalysts and think they may have come up with one that works. They project the cost to produce the gas to be half what it costs to produce it from oil. They’re building two demonstration plants to see how it scales up. They say the process could be duplicated at existing refineries and chemical plants to keep costs down. They say they could be producing gas commercially in four years.

    Here’s another one:

    Science: The Key to the Next Energy Revolution? : [url]http://news.sciencemag.org/chemistry/2014/03/key-next-energy-revolution[/url]

    quote: It worked better than he expected, Periana says. When he and his colleagues at Scripps and Brigham Young University ran a methane reaction with thallium—a main group metal—alkanes pushed the solvent molecules aside 22 orders of magnitude faster than when the reaction was run with iridium, reducing the overall energy required by about one-third, they report online today in Science. The success brought other benefits as well. The reaction runs at 180°C, and works on all alkanes at the same time, unlike the conventional natural gas conversion technology that works on only one species of alkane at a time. That could make it far easier, and thus potentially cheaper, to build chemical plants to convert natural gas to liquids using the new approach.

    “This is a highly novel piece of work that opens the way to upgrading of natural gas to useful chemicals with simple materials and moderate conditions,” says Robert Crabtree, a chemist at Yale University. But that way is not entirely clear yet, Periana cautions. For now, the chemistry works one batch at a time. To succeed as an industrial technology, researchers must work out the conditions to get it to work on a continuous basis, he says. If they do, it may one day make it cheaper to derive commodity chemicals and fuels from natural gas than from petroleum. And that would be an energy revolution indeed.[/quote]

    I currently drive a Ford F-150 powered by compressed natural gas. I buy the gas for the truck by the Gallon of Gasoline Equivalent (GGE). It’s basically the same amount of energy that’s in a gallon of gasoline. Currently, a mcf of natural gas costs <$4.50 and contains over seven GGEs (basically gallons of gas). I pay $2.44/GGE, but most of the cost is for the compressor, electricity used to compress the gas and the profit. The gas itself costs 65 cents/gallon.

    It seems like if they can convert NG efficiently, there would be a cheap form of energy available to allow our economy to grow for a few years (I get that there is peak NG). It seems like being able to use NG-based gasoline in our existing cars would be huge. Shipping NG overseas involves freezing it to -268 degrees which is very expensive and difficult. This means that NG prices are not affected as much by global supply/demand. Even if the price of NG rose to $14/mcf, that would still mean the gas costs <$2.00/mcf.

    Any thoughts?

    • Paul says:

      I see these stories in the MSM regularly – the ‘next big breakthrough is just around the corner’ — kinda like ‘free beer tomorrow’ — wake me up when it actually happens.

      The thing is we need the breakthrough NOW – and whatever it is it must be well under the price of oil as it is now – because $100 oil is destroying growth – so $100 cannot be the target price.

      None of these technologies has demonstrated that they can replace oil – or that they are anywhere near commercially viable. They are basically pie in the sky theories.

      We are on the precipice — conventional oil fields have mostly peaked – if there is going to be a miracle we need it immediately. I don’t see that happening

      • concerned says:

        Hey, I have taken a lot of steps to plan for the worst. It’s not like I don’t get it. I’m just saying that I don’t think MIT Tech Review or Science are really the MSM (I could be wrong). They are also offering a potential solution that could cost a lot less than conventional gasoline and so I don’t know where you get the “$100 target” stuff. Obviously it hasn’t been proven to be feasible yet, but I don’t think either of us is capable of ruling it “pie in the sky” theory yet. With Siluria, they say they are already building a demonstration plant to see if it scales up. That’s not everything you’d want, but it’s something.

        • Paul says:

          I am not trying to be difficult here but the other day NASA came out with some nonsense that the energy issue could be soft-landed if only we redistributed wealth and accepted – one of the top scientific organizations in the country and they are totally out to lunch on this issue.

          Many major institutions have been saying fusion is the future – the problem is they have been saying that for decades.

          If there were a potential breakthrough on the horizon then one of the big venture capital firms would be pouring major cash into it – or for something this critical, governments would be funding this with hundreds of billions of dollars of investment.

          Considering what is at stake surely we’d have a ‘Manhattan Project’ x1000 thrown at this problem.

          But we don’t – and of course the reason we don’t is because it is futile – if not then why not take a trillion of the many trillions printed and fund thousands of oil replacement initiatives across the world? Any scientist with even the most half-baked idea could qualify for a research grant.

          That’s my take on these various studies that we see – eloquent theories – that won’t work.

          Sometimes there are no solutions to problems – like trying to grow vegetables in the winter in Canada.

          • concerned says:

            Saying catalysts for GTL won’t work because Fusion won’t work doesn’t add up to me. This has nothing to do with NASA. I get that other things haven’t worked in the past after high expectations. That isn’t a rational reason to say that these new catalysts won’t work. It’s just as bad as the people that say, “well we’ve never had long-term oil shortages and so that will never happen.” I’ve read that Microsoft’s Paul Allen has invested $30 million in Siluria. I’m not saying that it is a proven thing, I’m just saying that there may be some hope there.

            • Paul says:

              I reference NASA only to demonstrate that top scientific organizations have it completely wrong.

        • Lidia Seventeen says:

          They’re the MSM in that their desires are conventional: He who dies with the most toys wins. The idea of conservation is not on their radar. And what none of these ideas for alternative energy production takes into account is that applying the energy—doing whatever work it is that you want to do: transportation, heating homes, etc.—will continue to produce CO2 and waste heat. Back in the days of “Limits to Growth” this was identified as “thermal pollution”, in the hypothesis of cheap nuclear power.

        • Patrice of Mtl says:

          Many on this blog will be upset if doom is avoided… The older you are, the more you wish the whole world to go down with you. The more you invest emotionally on one side of the equation, the less you see… I don’t think Siluria is the solution, at best a stopgap. But we must keep our mind open.

          • xabier says:

            On the contrary, the older I get the more I think about what I can possibly do in favour of worthy people who might come after me – I certainly didn’t think like that at 20!

            • Paul says:

              “The older you are, the more you wish the whole world to go down with you.”

              Possibly the most ridiculous comment every posted on this blog. I am in my 40′s but even if I were 80 the last thing I’d want is everyone to go down with me.

              All of the people on this blog have loved ones – many have children or grand children – only a derange whackjob would think that just because they are old and nearer death they’d be happy if everyone they love would be denied a full life – you’d have to be one selfish SOB

              You need to go to doomsdaypreppers.com to find people who are so disappointed with their sorry lives that they pray to god that he will destroy society so that they can take out their automatic weapons and open fire.

              Anyone who can’t wait for this happen an ignorant fool.

              I am all for any policy that delays this for another month – or even another hour. I have no death wish.

            • Peter S says:

              To: Paul
              There are a lot of people with a kind of perverse (but perhaps natural) joy in seeing their predictions come true.

              “The older you are, the more you wish the whole world to go down with you.”

              I dare say, that is our entire society. It doesn’t care about taking the whole world down with it.

            • Paul says:

              In one sense it would be gratifying to say to those who say ‘nonsense – there is a lot of oil left’ — after the SHTF ‘see – I was right’ — however given what being right means I don’t think one would take much gratification from being right on this issue.

              In fact when this does unravel most of those people will still not grasp why their world is falling to pieces – they won’t know why they are trapped in their homes in cities with nothing to eat or drink waiting to die. They will believe that the cause was an inept government — corrupt bankers — an out of control Fed.

              They will fail to recognize that these are symptoms – not the disease.

              And what does it matter — there is nothing one can do about the disease – it is and always was terminal.

              Most cannot unplug and shift to a sustainable small community farming lifestyle — and in any event doing that may be futile with 7.2 billion starving people roaming about

        • Peter S says:

          I think there are many possibilities, but there are many more bad than good ones. There are many possible substitutes for fossil fuels, but very few that would provide and maintain the same lifestyle or economic system – hence the topic of this blog: the limits of growth (not “peak oil” per se).

          I read about lots of “breakthroughs”, but nothing has ever come online to replace fossil fuels (or nuclear, which needs fossil fuels). Until it does, it doesn’t exist, as far as the economy is concerned. Perhaps they could when they become profitable (when fossil fuels become too expensive), but Gail seems to think that past a certain cost, oil will be too expensive to sustain our economic system. That brings collapse.

          If these alternatives are only feasible at oil costs past the budget of our economy, then they’ll never be used. The economy will collapse, because it can’t afford the alternatives. They system is very complex, and it seems (from what we’ve seen) that it can’t afford oil at more than $150 a barrel. If the alternative gives the equivalent of oil, but more expensive than $150, then the economy still won’t afford it, and will still collapse.

          • Paul says:

            Good points – but I don’t think $150 is necessarily the number. I think the price of oil is far beyond what the economy can bear as evidenced by the fact that a $10 increase in oil knocks nearly half a percent off growth in a developed economy.

            The money tap was opened in 2001 – that was when oil went from $12 in 98 to $38. So it would seem that the price would need to be below 38 (inflation adjusted) otherwise growth dies.

            So if there were an oil alternative it would have to be far cheaper than the price of a barrel of oil now – otherwise we have the same problem – expensive energy destroying growth.

      • dashui says:

        Wait a minute!
        You know a place that will have free beer tomorrow!!!????

    • sponia says:

      Very interesting! It just might work, at that. I wonder if you are familiar with the work of Fritz Haber? He pioneered this concept.Fritz took NG and made it into ammonia. This process will mean we are carving our transportation fuels out of the feedstocks of the ammonia based fertilizers that support our food supply. Automobiles literally and directly in competition for the food in people’s mouths..

      You should also investigate the work of William Stanley Jevons, an English economist from the late 19th century.
      “In economics, the Jevons paradox is the proposition that as technology progresses, the increase in efficiency with which a resource is used tends to increase (rather than decrease) the rate of consumption of that resource” – wikipedia

      If they actually succeed, then we are very quickly going to see the depletion of NG reserves around the world too. Finding a new way to continue the energy consumption party, without addressing the underlying causes of the predicaments it raises, just pushes society higher up the cliff – giving it farther to fall. Finding a new supply is only a temporary palliative, when what you really have is a demand problem.

      • Interguru says:

        Great comment. I should have thought of bringing Jevons into this.

      • concerned says:

        I don’t disagree. At this point I’m just trying to be an objective energy observer. I’m interested in seeing what’s going on and focus my efforts on positioning my family to be in a better situation than if I ignored reality. I’m not trying to argue that our problems are solved and so we can go back to BAU. I think most of us dislike it when people take a position and then bend their perception of reality to follow our predetermined conclusion. Like most people here, I’d like to bend my perceptions to better reflect reality. If the reality is that we go off the cliff in a couple years or we go off a taller cliff in a decade, I’d just like to get a better understanding of what is most likely to happen. I’m honestly not very optimistic about the Siluria thing panning out, but who knows? It’s interesting either way.

    • One issue is time. Another is the huge quantity really needed for scalability. A third issue is the need for taxes. What we think of as the oil price has a lot of taxes built it. These taxes would need to be built into the NG price as well.

      • concerned says:

        Thanks for your reply.
        Let’s say there was a serious oil crunch a couple of years from now. People finally wake up PO (etc.) becomes front page news. In this scenario people start to talk about adapting to a new future and being more pragmatic.
        What if a Siluria type technology comes online a couple of years into this scenario? It seems like it might have the potential to soften the impact while we try to adapt (especially in the U.S.)? It wouldn’t allow us to continue the lifestyles we have now, but it might allow energy for farming and further energy exploration?
        I apologize for my sloppy editing.
        Thanks again.

        • As I understand the situation, Saluria hopes to make cheap oil from natural gas. This is something that has eluded the industry for a long time–we have been able to crack long hydrocarbons into shorter ones, and thus make bitumen from the oil sands into useful products. But we haven’t been able to go the other direction.

          I can see what you mean. If we could scale this up, we could in theory add a cheap source of oil, and sort of reverse our biggest diminishing returns problem. The catch on this is the fact that the US is still a natural gas importer. Scaling up natural gas production is difficult, because it is necessary to have pipelines everywhere–you can’t ship it by train or by truck. It is necessary to keep a perfect match between supply and demand, or prices spike or tank, because of the natural gas storage problem. Once the natural gas is converted to oil, it will be easier to handle, but until then, we are dealing with very difficult logistics when it comes to scaling up.

          I am sure that there will be a lot of issues in scaling up natural gas. Our new natural gas supply is from shale, which requires tracking. These wells deplete quickly, so we will need to drill a very huge number of them and put in pipelines that won’t last very long. All of this will take a lot of materials and a lot of drilling rigs–probably many more than we have. Even if someone thought we had 200 years of natural gas at the rate we are using it now, using it for oil as well would make it deplete much more quickly.

          Thus, there might be some possibility in this direction. The catch is that there are an awfully lot of details that would need to be worked out. Even then, the oil from natural gas solution would just push the collapse problem down the road a little ways.

          • concerned says:

            I just wanted to say that I found the following article which moves things along a bit: http://www.icis.com/Articles/2014/03/21/9764336/us-siluria-starts-ethylene-to-fuel-pilot-plant.html

            “Because Siluria’s gas-to-liquids technology is so different from Fischer-Tropsch, Dineen estimates that its operating costs will be about $15/bbl, excluding gas.”

            On the surface, it sounds like maybe this is just an overly optimistic story with the goal of raising investment capital. I’d invite anyone to spend ten minutes listening to the CEO of Siluria, Prof. Angela Belcher and my guess is you’ll think she’s one of the smartest people out there: https://www.youtube.com/watch?v=70BaIBp6hDg

            I’m not suggesting this is going to solve the problems of sustaining exponential growth in a finite world, I just think it’s pretty interesting. I’m not the smartest guy in the room when it comes to this stuff, but I wanted to get this story out there so that smarter people could discuss it.

    • InAlaska says:

      It sounds really nice, but even if it is true, possible and economically scale-able, burning more fossil fuels is simply going to trigger the other half of the equation which is environmental collapse. That is why this isn’t a problem, it is a predicament. A problem you can solve, a predicament is something that you have to deal with.

  19. kiwichick says:

    renewables decrease the cost of electricity , not the other way around

  20. David L. Hagen says:

    Concerned
    For Gas – Fuel see <a href=http://www.velocys.com/Velosys microchannel reactors that are emerging from prototype to commercial.
    See also the break through by Olah et al. on bireforming of methane.

    Gail Tverberg
    James Hamilton documents how oil shocks caused 11 of 12 recessions since WWII.
    “Historical Oil Shocks,” in Routledge Handbook of Major Events in Economic History, pp. 239-265, edited by Randall E. Parker and Robert Whaples, New York: Routledge Taylor and Francis Group, 2013. Working paper version here.

    • David L. Hagen says:
    • David L. Hagen says:

      Correction: 10 of 11 recessions, and 11 of 12 oil price episodes.
      Gail reviewed Hamilton at: How close a link is there between oil price shocks and recession? Hamilton observed:

      All but one of the 11 postwar recessions were associated with an increase in the price of oil, the single exception being the recession of 1960. Likewise, all but one of the 12 oil price episodes listed in Table 1 were accompanied by U.S. recessions, the single exception being the 2003 oil price increase associated with the Venezuelan unrest and second Persian Gulf War.

      • BC says:

        David, note that US real final sales per capita have not grown since 2007-08, a period during which the average price of Cushing oil has been $88/bbl.

        Moreover, since 2000, real final sales per capita have decelerated from 2.1% to 0.6%, a period during which the average price of Cushing has been $65/bbl vs. the price from 1970 to 2005 of $21/bbl.

        Since 2000, when the average price of oil has more than quadrupled, the US has lost ~20% of growth of real final sales per capita. At this ongoing trend rate through the end of the decade, the US will have lost nearly 30% of growth of real final sales per capita from 2000 had the long-term trend rate continued.

        A 30% loss of real final sales per capita extrapolated for a generation implies a devastating effect on investment, employment, consumer spending, and gov’t receipts, and the standard of material consumption and standard of living for Millennials and their children, should they decide to have any.

        https://app.box.com/s/urkg7lqju0xz348shf2p
        https://app.box.com/s/gb8m6ur7zwfzflrwurw0

        Thus, the long-term trend rate of 2.1% for real final sales per capita is unsustainable with the price of oil at or above $40-$65/bbl.

  21. Max Kennedy says:

    Unfortunately there are 2 stories not detailed here that have tremendous importance. The 1st is the fallacy of a continuously growing economy in a finite world. Biologists understand the results. Inoculate a test tube of growth media with an organism that grows either exponentially or even linearly and you shortly end up with no resources and having to cannibalise what has been grown to survive just a little longer. The fantasy that is classical economics fails to recognise this reality. To bad that reality won’t choose to conform.

    The 2nd untold story is that oil/fossil fuels/economics conspired to lie to society by not paying the true cost of the energy. The externalisation of costs was a refusal to recognise reality and now that lie is coming home to roost. Until we as a society become willing to face reality and work within it we are going to compound the problem not make it better.

    • BC says:

      Well said, Max. One of the results is that the elites with access to the most resources per capita and military firepower self-select for those more inclined to utilize the resources in a last-man-standing contest against competitors for the remaining resources of the finite planet, unfortunately at the expense of the rest of us and our progeny.

      http://www.skil.org/
      http://skil.org/Qxtras_folder-2/rapidpopdeclineorbust.html
      http://www.skil.org/Qxtras_folder-2/overpopulationmeansImurder.html

      Perhaps you are familiar with Jack Alpert’s work on overshoot; but, if not, you might find it interesting, if not more than a little bit disturbing.

      • timl2k11 says:

        Thanks for the link to Alpert’s YouTube video. Seems pretty straightforward to me, however sobering. Looks like we need reduce our “standard of living” to about 1/50th of what is now, uh somehow. I think we can throw out any semblance of modern civilization.

        • VPK says:

          Ahh, all we need to do is have one set of cloths and some veggies and rice. Hmmm, and Chairman Mao Zedong preaching it’s all good.

          • BC says:

            “Elysium” is the more likely scenario for a generation or so, as the top 0.01-0.1% end up hoarding virtually everything of economic value and using the state’s authority and capacity to use violence to secure it.

            Increasing complexity via accelerating rate of increase in the number of technological solutions for problems that emerge from previous successful solutions is what got us where we are today, for better and worse.

            https://app.box.com/s/zt0g8yvwx3yzxk924jqq
            https://app.box.com/s/by4w7cponk8q8fkfsjxl

            We occasionally hear about credit, unreal estate, and financial bubbles, but the greatest bubble in all of history is the human population bubble that began in the mid- to late 18th century, coincident with the onset of the Industrial Revolution and the once-in-history harnessing of the tremendous net energy density of fossil fuels for work, especially agricultural production and transport.

            As a consequence, the rate of population growth accelerated to a doubling time of just 40 years after WW II to date, even though the 10-year rate of growth has halved since the 1970s. By this trajectory, population growth will fall below 1% as early as late decade or early next decade, whereas population growth will cease growing altogether and decline by no later than the 2030s-40s.

            However, in the meantime, Peak Oil, overshoot, the potential for a 20- to 30-year cooling period (Gleissberg and Suess/de Vries cycle convergence and low sunspot activity) and acute water shortages and loss of arable land risk billions suffering from malnutrition and premature death from disease, racial/ethnic/religious violence, resource wars, failed states, etc. Iraq, Afghanistan, Syria, Ukraine, Thailand, Libya, Egypt, and parts of sub-Saharan Africa are examples of the multi-decade process now underway at the periphery.

    • Thanks! Reality is unfortunately not very pleasant. For example, continuing our current slow growth is certainly not sustainable.

  22. Pingback: Oil Limits and the Economy: One Story, Not Two ...

  23. Paul says:

    How Russia could collapse the US economy http://www.youtube.com/watch?v=KXGPzDq45gM#t=1392

    • Jim Sinclair may be right. If Russia simply decides to accept payment for oil and gas in currencies other than the dollar, it would really mess up the derivatives market and the stock market.

      I was thinking that the threat was of selling oil and gas to the Chinese, but that can’t happen quickly, because of built infrastructure. This is a much more immediate risk.

  24. Stilgar Wilcox says:

    http://peakoilbarrel.com/

    Texas RRC Crude and Condensate Data, Is Eagle Ford Peaking?

    “Bottom line, I believe Eagle Ford is very close to peak. I predict a peak in Eagle Ford in 2014 if it hasn’t already happened. I seldom make outright predictions but I am making an exception in this case.”

    That’s a quote from Ron Patterson who runs peak oil barrel dot com. Gail, you like graphs, so I’d highly recommend this latest post of his and of course to everybody else on here as well. Once tight oil is past peak, is that going to be a ride or what? As it was said in Jurassic Park, “Hold on to your butts!”

  25. xabier says:

    On the Russian theme:

    Educated Russians just love Western Europe: notoriously the rich love London, prostitutes and crime gangs find profits in all the major cities, but increasingly middle-class Russians are buying holiday homes – and setting up businesses – in Spain, particularly the East Coast. It has a lovely climate, and they enjoy the culture of the Catalans.

    I don’t think they’d be very happy with a new Cold War.

    Putin used to take his holidays in Biarritz – when he was a nobody. Russian holiday enclaves in polluted, corrupt, mainland China? I wonder…..

  26. Stu Kautsch says:

    In case anyone missed it, yesterday’s “Rig Count” report (http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-reportsother) showed gas drilling at another new low (326 rigs). This might be a one-off but will still make the next couple of reports more interesting. This despite the price continuing above $4.
    Ironically, this occurs the day after the EIA reported natural gas in storage falling below a trillion cubic feet for the first time in many years. (I *think*. I haven’t followed these reports religiously, but the accompanying graphs show that in the past 5 years it’s always been well over 1.5 trillion.)
    If we have another hot summer followed by another cold winter (here in the northeast), gas could become an issue again.

  27. GreenHick says:

    Interesting question, Gail, as to whether governments do not understand or actually know the score and have just decided without consulting their electorates that the scale of change that would be needed even to have some hope of responding adequately is simply too disruptive of the status and uncertain in its outcomes. Inventing an alternative to capitalism in the midst of cascading failure is likely not something one chooses to do, but is forced upon us.

    • xabier says:

      I suspect that governments are internally more anarchic and disorganized than we might care to believe: ‘Petty quarrels between petty people in petty places’ probably sums up much of the internal history of governments.

      The hapless French President seems to have been as much interested in sneaking out of the back gate of his Palace to meet his mistress as in any long-term issues bearing on the French people.

      An interesting point is perhaps that if there were a real interest in encouraging resilience among the general population at a basic level in a robust way – for instance suburban gardening, the home economy, etc – then this could actually stimulate economic activity, not damage it, and without causing alarm or panic. But no lead is being given in this direction.

  28. Don Stewart says:

    Dear Gail and Fans of Complex Systems

    If you define ‘energy’ as ‘oil’ and ‘life’ as ‘GDP’ and believe that Tainter showed that complexity inevitably collapses, you need read no further. However, if your thoughts tend to turn toward anarchism, the free choice espoused by Ron Paul, utter amazement at the complexity achieved and sustained by biology, and like to drift off to sleep thinking about complex systems, I think you will enjoy spending 5 minutes with the jellyfish…Don Stewart

    http://howtosavetheworld.ca/2014/03/22/several-short-sentences-about-jellyfish/

  29. http://endofamerica.com/ has a lengthy infomercial for Porter Stansberry’s products, which also has some claims & info I found very unsettling, about http://en.wikipedia.org/wiki/Foreign_Account_Tax_Compliance_Act, said to take effect July 1, & said likely to hasten the demise of the US dollar as the dominant world reserve currency, & US economic collapse — comments?

    • Paul says:

      I am familiar with Stansberry and his used car salesman approach. Always amusing to see that he touts his right calls but we never hear about his wrong calls.

      He is a huge supporter of fracking – and constantly speaks of the shale revolution.

      I suspect he got in early and is trying to pump the bubble and exist.

      Here’s an example of his frequent nonsense that a friend sent me – my response to him below:

      http://thecrux.com/porter-stansberry-two-critical-lessons-every-commodities-investor-must-know-now/

      Hmmm… mocking Buffett…

      Warren Buffet is the ultimate insider — in fact I think he is more of a crony capitalist than investor these days as he was tight with Bush and is with Obama and cut sweet deals re: Goldman and BOA purchases — so to say his info on peak oil is ‘bad’ is rather a stretch — he would definitely have access to highly confidential stuff on this.

      For him to make a statement that oil has peaked (which is interesting – I was unaware that he had said that) surely he has good info — keep in mind his railway investments have done extremely well — and they haul around a heck of a lot of oil…. So he may have not made money on Conoco (yet) – but he’s done ok re oil…. Note that he has also just taken a massive stake in Exxon…

      What is important to note is that Buffet puts his money in for the long term — and if he has info oil has peaked then at some point his bets will pay off…

      “it turned out that we aren’t really out of oil at all. Nope. Instead, record cash flows from oilfields enabled huge investments in new technologies, like horizontal drilling. Those technologies unlocked new supplies of oil that dwarfed all previous discoveries combined.”

      I bet Stansberry has a ton of his own money into shale and is pumping out the hype – because much of what he is saying is bogus. Does he disclose personal positions on this stuff?

      Dwarfed previous discoveries? He loses all credibility with that – fracking is a drop in the ocean compared to previous oil discoveries – it’s not even as big as a single big conventional field never mind ‘all discoveries combined’ – and this is going to be a short-lived drop in the bucket. http://www.forbes.com/sites/christopherhelman/2013/06/13/why-americas-shale-oil-boom-could-end-sooner-than-you-think/

      Essentially what is happening is because there is so money flooding the markets a great deal has gone into shale gas and oil — and they are pounding many thousands of holes into the ground in a pell mell rush to get what’s down there — it’s like taking a conventional field and ramming 10,000 drills into it and sucking it dry as fast as possible – why do that? Because we are past peak and we are doing anything possible to try to get more oil into the market http://www.theguardian.com/environment/earth-insight/2013/dec/23/british-petroleum-geologist-peak-oil-break-economy-recession

      Record Cash Flows? Record amounts of printed money at ZIRP looking for a return on anything that has a good story is why there is so much money pouring in…. We are seeing huge problems with major oil companies because of huge costs of trying to find new oil fields http://online.wsj.com/news/articles/SB10001424052702304603704579325811963459456 So it’s not like they are cash cows as in the past.

      If fracking were such a cash cow then why are the big players not playing – since conventional plays are not delivering? I am sure they see it for what it is — a short-lived Ponzi scheme that will blow up at some point and they don’t want to be exposed to this. If not, surely they’d want a piece of the ‘record cash flows’ no? They’d buy out these mickey mouse companies and add all this cash to their balance sheets…

      Actually Exxon tried that with XTO and got burned massively (market cap dropped same amount they paid for XTO soon after)

      Also BP dumped their shale holdings. http://www.ft.com/intl/cms/s/0/e964a8a6-2c38-11e3-8b20-00144feab7de.html#axzz2t3pQzeX8

      “Don’t forget: Markets work. As prices move higher, new supplies are bound to be discovered and flood the market.”

      Indeed markets do work — and the markets will collapse if the price of oil remains over $100 because high oil prices and recessions have a pretty much 1:1 correlation. One reason we are printing money is to try to offset the impacts on growth of $100 oil….

      The problem is this: if the price of oil goes too high (see $147 in 2008) the economy craters — because people spend more on gas, heating oil and everything else — it crushes the consumer and it crushes the growth. But if oil goes too low – below $80 — fracking, deep sea, tar sands plays go broke – and investment into exploration for conventional plays drops off. And that causes a bigger crisis because it means even less supply is available as growth picks up when energy prices drop. So the price of oil goes through the roof very quickly – and we crash down again

      So this is a fine line to toe – prices can’t go too high — or too low — or we have a massive problem. And the markets will bust.

      • Buffet & Munger can’t have that much longer to go right? Suspect they’ll be history by the time we hit 2020 and thus experiencing the mother of aggregate energy declines.

        Hows that for perfect timing. As soon as we hit “Phase 3 Decline” graciously bow out the game. Wish I was in my 80s worth billions just as we enter the “Long Decline”

        Reminds me of that song by Kenny Rogers..The Gambler “Best you can hope for it to die in your sleep”

        May their souls RIP when they eventually do part this earth. Two great men in my eyes. Played the system and won hands down.

    • The talk certainly is lengthy–I din’t get to the end of it. I agree that the dollar’s reserve currency is certainly propping up the US standard of living, and we seem to be moving in a direction away from it. Losing the US dollar’s reserve currency status certainly will be a big problem. (If Russia starts selling natural gas and oil and Euros, it will be a problem, as mentioned in another comment.) Anything that pushes the problem along will lead to more problems quicker.

      Porter Stansberry doesn’t mention all of our energy problems at all, so the situation is worse than he says. The world may not “land on its feet” as the US loses reserve currency status. The world really does need the ability to keep borrowing and borrowing, to prop up the price of oil and other commodities. Having a reserve currency has allowed one country after another to play the role of the country without limits on borrowing. If we lose this ability to keep printing debt, the demand for oil may drop, so that the overall price does not stay high enough to lead to needed extraction. This could bring about the ultimate downfall of the system–whether or not it is connected to the July 1, 2014 law that I presume he eventually gets to.

  30. FerranPVilar says:

    Teaching thermodynamics to the public is a pending course. To grasp what’s happening, and understand Gail’s arguments at length, you need a clear concept of what energy really is. It’s not a very difficult concept but, surprisingly, most people (still) can’t get it. You need a rare kind of moment to take full account of it, and the rest is easy. A little effort is enough.

    • Stilgar Wilcox says:

      True, most people have no concept of energy, but rather they look to technology because that’s their toys. I have tried to explain energy to people and they cut me off. Today people’s attention span is so short they want explanations watered down to a single sentence. Well, it can’t be explained in a sentence, so they’ll just have to find out the hard way in or after collapse. I can see in the ruins of post collapse people will once again have time and the inclination to listen because they won’t be distracted by the noise, the speed, the next tech fix.

      • Paul says:

        Twats want the explanation in 140 characters in the form of a tweet.

        Seriously that is how it works these days – nobody wants to understand anything – they have no attention spans – they can’t even express themselves in proper sentences.

        I met prof from UCLA was visiting Bali some months ago and he said the most of the students sit in class multi-tasking with the priority being checking their phones for the latest messages on their social media.

        I have learned not to expect much from roughly 99.9% of the population.

      • Food’s Energy, Energy’s Food

        Done less than 4 words

        • I’ll try one sentence:
          “Energy is an enigma which cannot be created by humans; yet is absolutely relied upon by humans to build and power our technology and grow the industrial economy.”

          Meh, I tried. Still doesn’t have the shock value I want though.

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